PALO ALTO (CBS SF) — Gas prices have taken California’s nearly 24.6 million drivers on a wild roller coaster ride for the last couple of months while the rest of the country enjoyed somewhat stable and lower prices.
California continues to have the highest prices among all 50 states at $3.20 per gallon as of Monday — $ .80 above the national average — but it’s starting to come back down thanks to a plummet in the price of crude oil globally.
On Monday, Stanford economist Frank Wolack said this drop in global oil prices will continue to last for the next couple of decades.
While geopolitical and environmental issues could change that and turn oil prices upward again at any moment, Wolack predicts we’re most likely to see barrels to stay at $50 to $70 over the next 20 years for several reasons including:
- “North American shale oil production: The shale oil and gas revolution in the United States has led to an increase of more than 4 million barrels per day in domestic oil production since 2008. Combined with an almost million-barrel-per-day increase from Canada’s Alberta tar sands, the surge has significantly reduced American demand for imported oil.
- Technology innovations: A new innovation – CNG-in-a-Box technology – captures the natural gas that was formerly being flared off at the oil well and produces compressed natural gas (CNG) for use in vehicles and in drilling equipment, reducing the demand for diesel fuel. This technology makes productive use of natural gas in regions without natural gas pipeline infrastructure.
- Declining role of OPEC: Most members of the Organization of the Petroleum Exporting Countries face massive fiscal shortfalls because of low oil prices. To avoid further domestic unrest, these 12 nations are unlikely to reduce oil output, which would lead to even larger fiscal shortfalls. This makes unlikely coordinating reductions in oil production among the OPEC countries aimed at raising the global price.”
Wolack mentions several other factors which would make the likelihood of $100 per barrel oil very unlikely. Still, an environmental disaster involving shale oil and natural gas extraction could result in a ban in the affected areas. The United Nations’ international climate policy on carbon could also hinder gas prices.
“As long as this price of carbon is not so high as to make all fossil fuels uneconomic, this action could further spur the demand for natural gas, as more countries attempt to switch from coal to less greenhouse-emissions-intensive energy sources, such as natural gas,” Wolak wrote.
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Back in California, the Tesoro Corp. refinery in Martinez reopened after temporarily shutting down for maintenance. It remained closed until the labor dispute with refinery workers was settled last week. That, on top of an explosion at the Exxon Mobil Corp. Torrance refinery in February impacted, albeit temporarily, how much Californians paid for gasoline.