Consumers are seeing the lowest gas prices at the pumps in years, a phenomenon the U.S. Energy Information Administration (EIA) is attributing to an abundant inventory of crude oil. That low price may not indicate what lies ahead for the market, however, the EIA said.
Oil prices are currently running less than $30 per barrel, which a recent EIA report attributes to a few factors. On top of a major supply of crude, uncertainty in the global economy is keeping prices low. The non-energy commodity and equity markets are currently volatile, making it difficult to speculate on oil futures and what's driving prices lower.
The potential for additional crude oil coming onto U.S. and international markets, another factor helping to push down prices, means inventories are well above the five-year average forecast for the current period.
While higher supply means a drop in oil prices in the near term, EIA predictions are that as supply goes up, so will the cost of storing all of that surplus oil. That could mean prices will rise a bit in the long term.
“When inventories are high and rising, costs to store crude oil and petroleum products generally increase,” the EIA report said. “In futures markets, where people can buy commodities for specific delivery times in future months, high storage costs often mean that long-term deliveries are priced higher than near-term deliveries.”
So while gas prices aren’t predicted to skyrocket in the near future, the EIA predicts there will be a gradual increase in oil prices going forward -- especially as production ramps up in the U.S. market.