Fidelity Investments is taking a positive view of the recent rise in oil prices – saying it’s due to the economic recovery. In recent years, soaring gas prices have often been blamed on rising military conflict in oil-rich nations in the Middle East. But according to Fidelity, recent activity indicates that the current oil rally has more to do with a global economic recovery.
Apparently, global dependence on oil has spurred innovation in new oil production techniques in the United States. In fact, these unconventional technologies (such as fracking) have helped the U.S. become the lowest-cost provider of oil and natural gas in the world, for the first time in 40 years.
Other experts are keeping a closer eye on military turmoil, nonetheless. While there’s recently been an oil embargo on exports from Iran by Western nations, the general opinion is that this is unlikely to have a significant impact on price since other nations, such as China, are lined up to buy Iranian oil. However, since Iran sits on the most globally strategic supply route for oil supply (the Straits of Hormuz in the Persian Gulf), the threat of military conflict remains a huge issue.
As if rising oil prices isn’t enough, a new study reveals that some states could stand to update their gas tax to produce more revenue for state construction projects. The 50-state analysis report, conducted by the Institute on Taxation and Economic Policy, calls for some states to modernize their state gas taxes and peg those taxes to grow with the cost of transportation construction. States that were cited as remiss in updating gas taxes include Virginia, Maryland, New Jersey, Massachusetts, Iowa, Oklahoma, South Carolina and Arizona.
For now, it appears we could be in for another few months of more expensive gasoline, but the expectation is that prices will plateau later in the year. Please contact us if you’d like to discuss ways to make the most of your money in 2012.
1 Institute on Taxation and Economic Policy, “Building a Better Gas Tax,” 2012.