Gas Prices Stop Rising After 54 Daysby Tim Manni
Gas prices ended a 54-day rally yesterday, as the national average price for a gallon of gasoline fell three-tenths of a cent to $2.69. The easing continued today, as the national average fell another penny to $2.68.
While analysts are warning that the dip in price isn’t enough to suggest a turnaround, the easing has temporarily halted a run-up in prices that has reminded some consumers of what they endured last summer:
Crude prices have doubled in the last three months, hitting a high for the year of $73.23 a barrel last week before retreating. The rise in crude has pushed gas prices higher, hitting the wallets of consumers, who are now paying about a $1 billion a day for gasoline compared with $600 million at the beginning of the year. That impacts the amount cash-strapped consumers can afford to spend on discretionary items, threatening the nation’s economic recovery.
Last year, tensions like those in Iran could have sent a jolt through energy markets as oil prices raced to $147 a barrel in July and gasoline prices peaked at $4.11 a gallon. But the longest recession since World War II crushed demand for oil, easing worries that global tensions would suddenly send prices higher. Gasoline prices bottomed at $1.61 a gallon on New Year’s Eve at the height of the financial meltdown.
What influences the cost of gasoline?
Among many things, some oil experts are telling consumers to keep their eye on the conflicts occurring in Iran and Nigeria. Tensions abroad in oil-producing countries can strongly influence the price of oil. The protests in Iran — the second largest producer in OPEC — and the bombings of oil pipelines in Nigeria could have an adverse affect on their production.
However, even though overall demand for energy remains weak, money has poured into oil markets recently as the dollar has fallen against the euro. Investors have used crude as a hedge against inflation, betting that oil prices will likely increase as the economy improves and global supplies start to shrink.
Gas prices peak every year at or around July 4. As summer fades to fall, prices tend to drop by about 20-30 cents. If the conflicts in Iran and Nigeria don’t let up, Tom Kloza, publisher and chief oil analyst for OPIS, says we may not see that drop this year.
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