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Outlook on Future Oil Prices

As the massive oil spill in the Gulf of Mexico continues to spew thousands of gallons a day, more and more people are wondering why they aren’t feeling an immediate price increase at the pump. The issue isn’t so much a supply shock – we are simply experiencing an artificially low demand because the American economy is still recovering from a recession. As the Washington Post puts it:

It’s a matter of markets trumping the environment. Oil and gasoline supplies in the U.S. remain well above normal and demand remains weak coming out of the Great Recession. The nationwide average retail gasoline price is about 13 cents lower than when the spill began.

Since the Obama Administration recently indicated that they would not be pressing their offshore drilling moratorium, it appears as though there will be more than enough crude in either domestic or foreign supply to meet the market demand.

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