Rising gas prices won’t last, even after trump ends iran nuclear deal gas city indiana restaurants

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In February 2016, with oil prices low, producers started cutting back because their profits were smaller. They mothballed rigs and slashed investment in new wells. Meanwhile, OPEC and Russia mostly stuck to their much-ballyhooed output cuts. Slower-growing supply and healthy global demand helped oil prices bounce back up.

But that shift has gone too far, and the new trends driving the oil market are eye-popping. U.S. production rose in 2017. This year, new exploration rigs are operating 100%. Extraction technology keeps improving, cutting costs. Some oil fields are now profitable below $40 a barrel. Pumping at today’s $70 price produces premium profits. Capacity will gush. As this technology evolves, it starts rippling overseas, goosing output and capping crude prices.

Still, don’t expect gasoline prices to get too low. They’re less variable than oil. Depending on the state, taxes are between 10.7% (Alabama) and 25.5% (Pennsylvania) of the per gallon price of regular gas. The average is about 16%, or 53.7 cents a gallon. Those taxes remain stable despite oil’s gyrations.

Another factor is supply bottlenecks — especially in West Texas, where pipelines to Gulf Coast refiners are backing up. It will be tough to provide dirt-cheap gas everywhere without expanding capacity. Another irony: These regional bottlenecks create incentives for producers to drill more in North Dakota and Oklahoma, where similar bottlenecks in 2012 inspired pipeline bonanzas. Even more oil production will come there.

Even so, gas prices should be OK for your 2018 vacation budget. The U.S. has the world’s greatest natural geography and low-cost vacation destinations. So enjoy them while Goldilocks reigns over our economy ( see my May 6 column on that topic) and tune out the geopolitical noise. If you’ve never driven to Yellowstone, you really do owe it to yourself and your family.

In February 2016, with oil prices low, producers started cutting back because their profits were smaller. They mothballed rigs and slashed investment in new wells. Meanwhile, OPEC and Russia mostly stuck to their much-ballyhooed output cuts. Slower-growing supply and healthy global demand helped oil prices bounce back up.

But that shift has gone too far, and the new trends driving the oil market are eye-popping. U.S. production rose in 2017. This year, new exploration rigs are operating 100%. Extraction technology keeps improving, cutting costs. Some oil fields are now profitable below $40 a barrel. Pumping at today’s $70 price produces premium profits. Capacity will gush. As this technology evolves, it starts rippling overseas, goosing output and capping crude prices.

Still, don’t expect gasoline prices to get too low. They’re less variable than oil. Depending on the state, taxes are between 10.7% (Alabama) and 25.5% (Pennsylvania) of the per gallon price of regular gas. The average is about 16%, or 53.7 cents a gallon. Those taxes remain stable despite oil’s gyrations.

Another factor is supply bottlenecks — especially in West Texas, where pipelines to Gulf Coast refiners are backing up. It will be tough to provide dirt-cheap gas everywhere without expanding capacity. Another irony: These regional bottlenecks create incentives for producers to drill more in North Dakota and Oklahoma, where similar bottlenecks in 2012 inspired pipeline bonanzas. Even more oil production will come there.

Even so, gas prices should be OK for your 2018 vacation budget. The U.S. has the world’s greatest natural geography and low-cost vacation destinations. So enjoy them while Goldilocks reigns over our economy ( see my May 6 column on that topic) and tune out the geopolitical noise. If you’ve never driven to Yellowstone, you really do owe it to yourself and your family.