Share this story
Close X
Switch to Desktop Site

Is $3 a gallon a historical relic? What could bring gas prices back to earth.

Next Previous

Page 2 of 3

About these ads

Absent a fix, the rising price of gasoline is impacting the US economy by draining money from Americans’ pockets. On Friday, the government reported that the February Consumer Price Index rose 0.4 percent, in large part because of rising gasoline prices. In March, prices have continued to move higher.

One indication of political angst: Obama and UK Prime Minister David Cameron discussed releasing oil from the Strategic Petroleum Reserve when they met. Reportedly, they made no decision.

Prices rose sharply last spring as well when the civil war in Libya disrupted oil supplies. Then, Obama released oil from the Strategic Petroleum Reserve before the conflict turned in favor of the rebels.

Oil prices fell from $113 a barrel on April 29 to $97 a barrel by May 6. By October, oil was selling for $75 a barrel. “That’s a decrease of over $30 a barrel,” says Mr. Ash. “For every $1 a barrel decrease, the price at the pump comes down 2. 5 cents a gallon so that’s a 75 cent per gallon decrease.”

Another factor that could lower the price of oil and gasoline is if the economy were to slow or even go back into a recession. In December of 2007, the official start of the recession, the price of oil was $98 a barrel and gasoline was selling at $2.81 a gallon (not adjusted for inflation). By the end of the recession, in June of 2009, the price of oil had fallen to $59 a barrel and gasoline was selling for $2.35 a gallon.

“If demand weakens for oil, that may mean bad news for everyone,” says Sandar Cohan, an energy analyst at Energy Security Analysis, Inc. in Wakefield, Mass. “It may mean we are not doing well in the economy.”

However, as Mr. Cohan also notes, demand has already weakened while prices have not. Gasoline demand is off about 6 percent to 7 percent compared to a year ago. “You would expect a much lower gasoline prices at this level of demand,” he says.

Next Previous

Page:   1   |   2   |   3

Follow Stories Like This
Get the Monitor stories you care about delivered to your inbox.