Gasoline finally starts to drop

Pump prices have fallen steadily over the past month as oil prices and demand have come down.

By Kim Peterson Jun 10, 2011 1:28PM
Image: Buying gas (© moodboard/Corbis/Corbis)Gas prices are finally falling -- just what the slumping economy needs.

The average nationwide price for a gallon of regular gasoline is $3.72, down a penny from Thursday, 7 cents from a week ago and 24 cents from a month ago.

And it looks like that trend may continue for a while, the way oil prices are going. Friday saw a sharp drop in light sweet crude for July delivery to less than $100 a barrel. The price drop came after reports that Saudi Arabia would boost production to 10 million barrels a day in July.

On top of that, the demand for gas -- at least in the U.S. -- is down. In the four-week period ended June 3, gasoline use was 1.3% lower than it was in the same period last year, according to MasterCard. We've seen the same pattern for months now.

Part of the reason is that people are driving less or switching to more-fuel-efficient vehicles. Ford (F), General Motors (GM) and other carmakers report strong interest in hybrids and compact cars as shoppers look to trade in their gas guzzlers.

Would placing a cap on wholesale gas prices work? That's what one lawmaker says in the following video.

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People are also carpooling and making fewer trips, which has hurt Wal-Mart (WMT) and McDonald's (MCD). Image: Oil drums (© Kevin Phillips/Digital Vision/age fotostock)

There's one more reason behind falling gas prices: the unrest in the Middle East. Or, to be more precise, the lack of more dramatic unrest in the Middle East. Oil production in Libya ground to a halt in the uprising there, triggering worries of similar conflict in Saudi Arabia, the largest oil producer.

But Saudi Arabia has been surprisingly stable, and its reported move to boost production in July only reinforces that.

So it looks like gas prices may continue heading south and stay there for a while. The chief executive of Gulf Oil told MSNBC that prices could drop to $3.50 or lower by July 4.

That would be a welcome boost to the slumping economy. One recent poll of small-business owners found that higher gas prices caused 41% to raise their prices, while 26% laid off workers or cut hours.

Large companies are affected as well. Airlines have raised fares in response to higher fuel prices. Food producers like Kraft (KFT) and JM Smucker (SJM) are paying more to transport goods.

Higher gas prices have been one of the biggest drags, if not the biggest, on the economy. If this reversal holds, the impact could be remarkable.

Tags: gm
110Comments
Jun 10, 2011 2:14PM
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let me get this straight...gas prices are going down because: less consumption, more people switching to alternative fuel vehicles and the unrest in the Middle East........

Aren't these the same reasons they gave on why the price went up??

(personally, anything over 75 cents a gallon is robbery..no matter what their excuses are)

Jun 10, 2011 2:12PM
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Considering that demand for gasoline is down closer to 40%  and the fact that OPEC hasn't controlled the price of crude oil production prices since 1988 when the New York Mercantile Exchange oil future traders took over.  The day traders in New York are selling 90 day futures for delivery of crude to a place in Oklahoma. These prices are future delivery prices and the price of gas is raised right away giving the oil companies untold billions of dollars in windfall profits is a wonder it took this long for the gasoline prices dropped even though the demand has fallen dramatically.  Greed is the reason for high gasoline prices  not actual demand or use.
Jun 10, 2011 2:05PM
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Well, of course the price of gasoline is dropping.  By now, all the Big Oil Corps have refilled their swimming pools with fresh c-notes.
Jun 10, 2011 2:29PM
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"But Saudi Arabia has been surprisingly stable, and its reported move to boost production in July only reinforces that."

 

Yet we are paying laborers millions of dollars in North Dakota which they claim has more oil than Saudi, why the hell are we still depending on foreign oil? I just don't get it.

I agree with skier99.....Gas prices will jump .10-.15 cents per gallon overnight but then take 3-4 weeks to trickle down a penny or two. So sick of this government b.s!

 

Jun 10, 2011 2:16PM
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Why do the oil companies take so long to lower the price when the barrel goes down, but as soon as the barrel goes up they all jump on the bandwagon and raise prices. Around western mass the local companies are hurting the economy(Pride&FL roberts) i have seen them go up on a friday afternoon but never down quick enough. The prices are hurting all of us.
Jun 10, 2011 2:05PM
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Obama defied a court order to block drilling.

He is on the record as saying "Higher fuel prices are good for America" when he was speaking to an Environmental special interest group.

Granted, he has no business experience, and so he wouldn't have any idea how important affordable energy is to our economy - but really is there a better way to attack capitalism than to diminish the availability of energy that runs it?

We need leadership that gets how business works.

Jun 10, 2011 3:32PM
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I think it's funny that they make it sound like gas is back to being cheap, it's still around $4.00 a gallon! $4.00 a gallon isn't cheap! People need to realize that it's a mind game, just because its cheaper now that it was a couple weeks ago doesn't mean that we should be ok with $4.00 a gallon, thats what they want us to think. As fas as demand goes, why don't the oil companies invest some of thier record profits to improve meeting demand and getting product to the customer, ohh wait thier making too much money, why would they want to do that?
Jun 10, 2011 2:38PM
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a saudi prince last week was reported to have claimed the drop is because they fear americans will replace their need for oil with new technology.  so much for "supply and demand"  they teach in economic classes.  can't wait for the day we all have hybrid vehicles that eliminate our reliance on the middle east.  a trillion in profits in 2010 while they watch the world suffer and laugh.  arrogant bastards.  i agree with $0.75 gallon price, which we'll never see until the day comes we've no use for the saudi's.  also agree with the abundance of speculators who control our markets with fear.

Jun 10, 2011 2:29PM
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looks more like to me they are trying to find the highest floor they can for gas prices, having maybe actually figured out that gas above a certain price is going to do more long term harm to the economy than is good for them. So you lower the prices until you find the equilibrium point between price & demand, and once they find it, they will stick to it stubbornly regardless of current world affairs or oil stockpiles..
Jun 10, 2011 2:26PM
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Every time the price goes up it never really drops back down. It just backs off the high.  So lower prices only mean they aren't as low as they were or as high as the will be the next time around. It's all just games they play to keep raising prices while pretending what ever crap people claim they will believe. Just go on and take the red pill already!
Jun 10, 2011 2:35PM
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Amazing. And we think speculators have nothing to do with this??? The market generates fear  of shortages. That implies a greater demand for short supply. Immediately the price goes up...What has happened, is the price reached a level that the market could not bear, As a result, demand dropped and prices dropped with it. Consumers NOT big oil or OPEC drive the market. IF we were ever able to achieve  even partial independence from petro products,

the result would be startling...There is no shortage of oil. There is also no shortage of greedy speculators and oil producing countries whose economies hinge on black gold. If they can get us to believe the tap will run dry, they can write their own check...

Jun 10, 2011 2:21PM
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I am completely agree with Heinzwurst, demand - it just excuse for speculators move up price. Libya produced only 2% of oil, but the prices moved up 25%! Summer hits comes - demand is increased let jack up natural gas prices, even though we have a plenty of gas! Financial institutions have 85% of oil future contracts! We are getting rip off right here!   Silence will kill us!

 

 

Jun 10, 2011 2:35PM
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They raise the price of gas .20 then drop it .10, raise it .20 and drop it .10 etc., etc.,
Jun 10, 2011 2:38PM
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what good is it to blame any president unless you simply feel better blaming someone for the issue. Look at congress, whose members usually outlast (in office) a president by decades..that is where the real power lies...
Jun 10, 2011 2:13PM
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Not their bellies, but their storage facilities... they've no place to put more overpriced gas... Therefore, they're willing to deal, for time being.
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This is your Government at work they started the hike while there was no oil shortage they did this to help spending more money in to research for electric vehicles. We have a long way to go before going green will do the job. Electric vehicle's would be good for some people but not for hauling freight or produce to market. Batterie's are not and never will be good enought to do this job , they need a fuel cell like on the space shuttle it has two and they've been in use for 50 years and  they don't require any recharge . There is no oil shortage we have plenty for the next hundred years and have plenty of time to build electric vehicle's with out batterie's..Our economy is bad because our Government is making third world leaders Billionare's, this has to stop we can no longer aford to support other country's we have people here living under bridge's , it would help our State's if we kick out all illegals, they are killing our health care and food stamps and yet they have brand new suv's and $5,000.00 wagon wheels....
Jun 10, 2011 2:28PM
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It doesn't matter which president it was that caused the spike or decrease.. what we have to look at is how weak they ALL have been to stand up and say "enough is enough"... money really does run this country any more and it is sad......... *sigh*
Jun 10, 2011 2:58PM
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Gas prices down.  A month from now it could read just the opposite, gas prices up.  As long as we are captive to foreign oil, we will be in this situation.  Just yesterday it was annouced that upwards of 750 billion barrels of oil were discovered in the Gulf of Mexico.  Of course, our esteemed politicians in Washington won't do anything about this.  Obama and his boys want green energy, (which is good, but not realistic in the immediate future), but before we get to green energy, we need to drill for gas and oil and dig for coal.  The longer we wait to do this the further behind we will get.  Will they ever learn?  I doubt it.  Obama has his agenda and he doesn't care who he hurts or what he does to this Country. 
Jun 10, 2011 4:11PM
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Dannyboy...Speculators are good? So is CRACK good for you too? That is a ridiculous statement. in the past 10 years gas has gone up and down more times than a street walker. 80's and 90's it would be lucky if it happened once a month. These high prices are ALL DUE to a little test that took place in 2000-01 when gas was at $1.25 and then BAM it jumped to almost $2 for NO REASON to see how people would react. Then it dropped back down, everyone bitched but kept driving. So that's what happens now lets raise it to $4 drop it to $3 and people will LOVE IT. Then lets take it to $4.50-$5 then drop it to $4. Its all a game.
Jun 10, 2011 1:59PM
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I'm just glad I have a car that runs on water!
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