CHESSNOID

Thank goodness the price of gas is coming backing down to reality.  It seemed like just yesterday we were at $5.00 a gallon here in the US.  The price of  a barrel of oil hit a high of $147.  Today, gas is back to where it was a year ago.  Reuters:

The national average price for a gallon of self-serve, regular unleaded gas was $2.7785 on October 24, a decline of about 53 cents per gallon in the past two weeks, according to the survey of some 7,000 gas stations.

Gasoline is now about a penny cheaper than it was a year ago, and about $1.33 less than it was at a record peak in July.

“The drop is unprecedented,” Lundberg said in an interview. “It was dictated by the crash in crude oil prices and deepened powerfully by falling U.S. gasoline demand.”

Oil settled down nearly $4 a barrel on Friday on broader worries about a global economic recession, despite an agreement by the Organization of the Petroleum Exporting Countries to cut output.

At one point on Friday, U.S. light crude for December delivery dropped to $62.65, its lowest since May 2007 — just before the current credit crunch gripped U.S. markets and threatened to push the country into a recession.

“The even weaker economy now suggests that despite a price crash on the street … it is still probably not enough to inspire any strong comeback in demand any time soon,” Lundberg said.

I would predict gas will continue to fall despite OPEC trying to reverse the course of crude oil prices. From this severe recession, most people have had to basically change all their habits and attitude towards transportation. More people are buying fuel economy cars and opting out of the gas guzzlers, pickups, and SUVs. I don’t even think OPEC could have guessed that they would be just another domino falling from our housing crisis. OPEC will still try to increase prices by cutting supply according to CNN:

Khatibi said if the decision Friday by the Organization of Petroleum Exporting Countries to cut 1.5 million barrels of production per day does not halt the drop in prices, more would need to be done.

Crude prices have dropped below $65 per barrel, yet Iran needs prices of around $90 to balance its budget, according to International Monetary Fund estimates.

Will it work? I don’t think it will this time. Americans are just driving less because we were forced to. We really couldn’t afford gas at $5.00 a gallon so we changed our habits. Now that demand has dropped off, most of us are keeping with those money saving habits because the price of everything else has gone up and would rather spend it on those goods than sending our cash back to Saudi Arabia and other OPEC countries.

Another positive good thing has come out of this financial crisis that may help the overall environment. Not just less oil consumption, but more focus on making renewable energies from wind, solar, water, etc to power up our nation. At least both presidential candidates have pledged to do it, hopefully this isn’t one of the promises he breaks.

When I went out today, I did see gas under $3.00 a gallon and I am in California. Woo hoo!