The Wall Street Journal reported that gas prices may have bottomed, though price increases may be weeks or months away. In recent weeks demand for gas has risen slightly, and crude oil prices have risen slightly – to just under $40 per barrel. The most significant event, though, seems to be that OPEC has reduced production by 2.2 million barrels of oil per day. Back in the fall of 2008, gasoline demand fell precipitously and OPEC couldn’t reduce supply fast enough to prevent the rapid downward spiral we’ve seen since then.
Energy Information Administration data shows that average retail gas prices were over $4.00 in June and July of 2008, but fell below $3.00 by October and below $2.00 in November. Because the economic recession plays such a big role in this softening of demand, analysts don’t expect significant price increases until an economic recovery is underway. That assessment is reinforced by soft consumer demand around the globe.
If there’s one bright spot in a bad economy, it’s that gasoline prices have fallen, and they’re expected to drop even further. As the global economy falters, demand for oil has dropped.
And since the price of oil makes up about half of the cost of a gallon of gas, analysts see more relief ahead at the pump.