For the first time in what feels like forever, the price of gasoline is less expensive than it was exactly a year ago.
While this would usually be reason for joy, it appears that the major factor behind the significant decline in the prices of oil and gasoline is the rapidly deteriorating world economy.
Today’s national average price of gas stands at $2.73 per gallon, which is three cents below where it was exactly 12 months ago. While $2.73 for a gallon of gas certainly isn’t cheap by any stretch of the imagination, it’s certainly a heck of a lot more affordable than what we dealt with for most of this year.
Since hitting a record high of $4.12 per gallon on July 14, the price of gas has fallen by over 33%. Over the past month alone the price of gas has fallen nearly 25% – thanks to the credit crisis and fears of a very deep and painful recession.
Currently, there are only five states reporting an average gas price above $3 per gallon, with Alaska having the highest state wide average price at $3.60 per gallon. Conversely, there are now ten states reporting an average gas price below $2.50 per gallon, with Oklahoma having the lowest state wide average price at $2.27.
In an effort to help stem the tide of falling oil prices – which are down nearly 60% from this summer’s record highs – OPEC has announced that it will cut crude oil production by 1.5 million barrels per day. However, because this cut was less than the expected 2 million barrel per day cut, the price of oil fell about $3 per barrel after the announcement.
This likely means gas prices will continue to fall in the near term. While this is good news for anyone with a car – additionally, this will effectively kill inflationary pressures – the trade off is we’re having to deal with the worst economy in decades.
Unfortunately, it looks like things are going to get a lot worse – higher unemployment, further declines in stock and home prices, and sinking corporate profits – before they start to get any better.
Without taking inflation into account, these numbers just don’t add up. If the price of a barrell of oil was $147 in July, and gas was around $3.90 or more at that time… and the price of a barrel now is about $60, then the price of gas should be about $1.60. I just filled my tank up with gas yesterday that cost $3.39.
Not in Alaska it isnt.
Still $4.30.
NC,
The prices of oil and gasoline do not move in step. Based on percentages, the price of oil climbed much more quickly than the price of gasoline. So, in turn, one would expect the price of oil to fall much more quickly.
still expensive in my country dude, with unstable inflation
The prices of oil and gasoline do not move in step. Based on percentages, the price of oil climbed much more quickly than the price of gasoline. So, in turn, one would expect the price of oil to fall much more quickly.
I for one am glad to see prices go back to “affordable”. the question is, how long will they remain!
Jiff
http://www.anonymity.pro.tc
$1.99 south texas
It’s definetley affordable now here. Such a relief on my wallet too.
$2.40 South Chicago burbs
..because oil is only 1 part of the cost structure of a gallon of gas…taxes, refining, distribution and other elements go into it. The relationship is not linear.
Actually, if you look at graphs comparing the price of crude oil and the national average price for gasoline, you will see that the price of gasoline holds much more tightly to the price of oil on the way up… but on the way down, there is a greater gap between the two. In other words, gas prices follow oil more quickly when going up than when going down. In part, this is because retailers can justify raising prices “in anticipation” of price changes… a very close relative of what I call price gouging.
Source: http://www.factsonfuel.org/gasoline/index.html#gasoline_prices
Yea, it will keep dropping with the declining economy and as inflation rises the profit margins will decrease aswell, price will come back up, knowone will be able to afford, production will slow down due to this, bam, gas shortage. Your local gas stations will close, and larger gas stations will be running themselves dry leaving people without gas.
Too bad too, because I live in a country that is very close to the US, and has alot of oil. Hope we don’t get invaded.
I wonder if the average person in the population will ever realize that the term Price Gouging is fictional.
So far everyone I meet who worries about “price gouging” will happily sell something to you for twice or more what it marginally cost them.
If you can’t afford to buy it, DON’T.
What you call Price Gouging, I call market adjustment.
Gasoline will go to between $4.50 and $5 six months after the election regardless of who wins. The price of oil is easily manipulated and a fiction.
If McCain continues to trail sharply in the polls, it is quite likely gasoline could go as low as $2 or less as a nationwide average.
When oil prices rose, gas prices followed, but they lagged behind by a bit. Gas stations played a dangerous game of chicken, seeing who could keep their prices lower for the longest. This kind of competition kept prices from skyrocketing initially, but it also cut into profits for gas stations, who only make pennies on the gallon to begin with.
When stations started becoming financially unstable, prices got very volatile, as they couldn’t afford that competitive spirit anymore. As Mike said, they began to anticipate price changes, which was necessary for them to stay in business.
Now that oil has fallen, its a game of reverse chicken. Stations are trying to keep their prices high, to pad those losses from when prices rose. Competition will keep driving the prices down, but it would be a horrible business strategy on the gas stations’ part to simply drop the price directly back to where it should be (~$1.60 or whatever).
Have a little patience, and be happy the prices are coming down. They’ll get there, just give it a couple of months. Now that oil is back where it should be, gas will soon follow.
NC,
The prices at the pump are always delayed from the price change of the barrel.
$1.93
Valero 3201 E Harrison Ave & SL-499
Harlingen, TX
Sat 25 2008 11:15 PM
Prices for gasoline reflect hundreds of parameters, including the most important, willingness to pay.
Unfortunately, the hyperinflation, which is Phase II of the impact of counterfeiting perpetrated by the Fed and an idiot Congress that allows trillion dollar deficits, will drive gasoline prices into double digits within a year (>$10 a gallon).
No US president has the cajones to do what’s right. Expect the worst, then whatever happens will seem like a blessing.
Yeah gasoline is down not because demand diminished BUT because speculators dont have money to speculate anymore!
They should be ashamed of what they did to the economy! See this image:
http://whatreallysucks.com/sympathy-for-the-devil/
To check on local gas prices try the following website:
http://www.gasbuddy.com
From looking at the graphs (6 year graph in particular) it appears the that relationship between barrel price and gallon price is NOT linear at the higher barrel prices. When oil is below $50/barrel the gallon and barrel price rise and fall at the same rate. However as the barrel price accelerated above $75 and all the way to $140+ the gallon price did NOT accelerate at the same rate — otherwise we would be paying $6.00+/gallon.
Later,
actually when i didn’t know about hydrogen cars I was worried about oil price hike and other oil related stuffs, they really hurt my pocket, but now I’m using hydro cars and it really reduce the use of fuels in my car, now i can run extra miles without extra cost. isn’t that great?
one more day of low gas prices!!!!
1.99 today @ WM in Bryan Texas. was 2.25 last week when I filled up. what a relief!