Cheap Gas Prices Likely to End on Oil Price Surge

Egypt does not have a position on the list of the world’s top nations in proven oil reserves. But neighbors Saudi Arabia, Iran, Iraq, Kuwait and the United Arab Emirates are among the top seven. As MarketWatch points out: “Although Egypt doesn’t export oil, it serves as a transit hub for oil through the Suez Canal and the Suez-Mediterranean pipeline.”

Not terribly long ago, the actions that constituted the Arab Spring were dying off. Based on attempts by huge numbers of people to oust Egyptian President Mohamed Morsi, the movement may have been rekindled.

If gasoline prices follow oil prices — and they almost always do — the respite from the spikes of a year ago may have ended. During August of last year, the price for a gallon of regular rose above $3.70. The number fell well below $3.50 recently. By most measures, the price has kept falling lately. As a matter of fact, according to the AAA Fuel Gauge, gas has dropped to $3.478, down from $3.617 a month ago.

The math that supports the relationship between gas prices and gross domestic product always has been simple. The average household income in the United States is just above $50,000, before taxes. Federal taxes have risen this year. Gas prices also are affected by state gas taxes, which have risen recently in eight states. These three factors taken together will put downward pressure on economic expansion, which is already fragile.

Gas prices have run toward $4.00 several times since 2008, always pushed up by lack of supply, the fear of a supply shortage or low refinery capacity. Refineries in the United States generally are operating and not out of service for maintenance. Overall supply has been ample, but the Middle East situation has caused a rise, and recently a sharp one, in fear.

Most observations about oil prices have been positive since the start of spring. Shale is supposed to yield enough oil to make the United States energy independent, and perhaps a major exporter by the end of the decade.

But the end of the decade seems further off than before the Egypt uprising began, and the wonderful results of new production quickly have been muted by the irregular but omnipresent trouble in the Middle East.