Gas Prices Fall Back Below $4

For the first time since June 6, the national average price for a gallon of regular unleaded gasoline has fallen below the $4 mark.

According to GasBuddy.com, the national average price for gasoline has slipped to $3.99 per gallon. While this is certainly good news for many drivers – the price of gas has been on a slow and steady decline since hitting its record high of $4.12 on July 14 – there probably isn’t much solace to be taken. After all, gas prices are still up nearly 35% since last year.

Currently, the state with the lowest average price is Missouri at $3.73 per gallon, while Alaska is reporting the highest prices at a whopping $4.81 per gallon. There are 16 states reporting an average gas price above $4 per gallon.

The recent drop in gas prices – and the price of oil for that matter – can be mainly attributed to a single factor: as the price of gasoline has increased, our demand has started to decrease. After years of wondering what the American consumer’s breaking point is regarding increased fuel costs, I think it’s safe to say we’ve found it.

Since oil hit its record high of $147.00 per barrel on July 11, prices have fallen roughly 15%, due in large part to demand destruction. Over the past several weeks, government reports have shown that Americans are driving less) (i.e. using less fuel) and the economy is continuing to weaken – which will likely reduce both current and future demand as well.

Considering most of the oil imported to the U.S. goes towards the production of transportation fuels, it’s no wonder the decrease in demand for transportation fuels has caused such a dramatic turn around in the price of crude oil. People have been driving less, walking or riding a bike more and have started switching out their gas guzzlers for vehicles with better fuel economy.

While this temporary relief is certainly good news for many, I don’t expect the good times to get much better, or last much longer.

Ultimately, it seems like we’re going to be stuck in this price range for both gasoline and oil. As oil and gasoline prices rise, demand falls which in turn brings down the price. As oil and gasoline prices decrease, demand starts to climb again, which in turn causes the price to go back up.

So, enjoy your sub-$4 gas while it lasts.

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