Drivers were told that the price at the pump would steadily keep dropping throughout late summer and fall. Then, suddenly, the much-welcomed decline in prices stopped. What happened?
Two weeks ago, the national average was $3.63 per gallon of regular gasoline—down from $3.70 the week before, and $3.95 in May. As anticipated, gas prices continued inching downward, hitting $3.56 on Monday (OK, $3.569, so nearly $3.57), before popping back up to $3.57 ($3.572, to be precise) Tuesday, and $3.575 today.
Though the increase at the pump was less than a penny, it’s noteworthy because the experts predicted prices would steadily decline throughout late summer, reaching perhaps as low as $3.35 by mid-September. Will that still happen?
That’s the million-dollar (or rather, multi-billion dollar) question. Oil prices rose Tuesday as the situation in Libya grew muddled, with confusion over whether the rebels or Col. Muammar Gaddafi‘s forces had the upper hand.
Regardless, the consensus seems to be that once things settle down in Libya, oil prices—and prices paid by consumers at the pump as well—will start decreasing once again. Here’s some expert insight courtesy of US News:
“Certainly it’s our view, and I know it’s the view of some oil analysts that we talk to and respect, that curtailment of Libyan oil supplies is partly responsible for recent high levels of oil prices,” says Joel Prakken, chairman of St. Louis-based economic consulting firm Macroeconomic Advisers.
It’s unlikely that post-Gaddafi Libyan oil production would lower gas prices immediately, however. Instead, what’s most likely to lower oil and gas prices in the near future will be the same forces that were pushing prices down over the past few weeks: the struggling economy. Once Libya stabilizes, gas prices can get back to doing their thing, which most recently was decreasing. Per the Los Angeles Times:
Prices at the pump could fall in the near future, but that would largely be due to the weak economy and the end of the summer driving season, not a fast rebound of Libyan exports, said David Kirsch, director of market intelligence at PFC Energy, a consulting firm.
What drivers can expect is a further decrease in prices at the pump, though perhaps not as sharp and quick a drop as once anticipated. A dip in gas prices always lags annoyingly behind a decrease in oil prices, and, according to the Wall Street Journal, relief at the pump is coming especially slowly lately. Since May, crude-oil futures have plummeted by 38%, and yet gas prices have dropped just 9% over the same time period.
For the sake of comparison (courtesy of CBS News), when oil prices dropped 77% in 2008, gas prices followed suit by decreasing 61%. Gas prices are expected to continue dropping in the months to come—the average gallon could be 40¢ cheaper by Christmas—but bear in mind that’d still be nearly 50¢ more expensive than the summer of 2010, when the national average hovered around $2.70 a gallon.