Will Oil Prices Continue to Drop?
October 13, 2008 – 8:48 amUp until July, gas prices kept getting higher and higher and higher. Almost every headline in the news had to do with the rising price of gas. These extremely high gas prices forced people all over the country to change their lifestyle. People found themselves not going to restaurants or movies as much because they had to fill up the car instead.
Since July, we have seen a somewhat steady decrease in gas prices. The drop has been extremely slow though. However, gas prices are still well over $3 per gallon around the country. People have begun to turn their attention from the gas pumps to Wall Street. Since the stock market is in serious despair, people have sort of “forgotten” about high gas prices.
So, what is the deal with oil prices now? Back in July, a barrel of oil cost almost $150. Now, we are paying just under $85 per barrel. Of course this is good news…right? Well, economists and other experts don’t think this significant oil price reduction will be long-lasting.
Why did oil start dropping anyways? Many experts around the country credit the drop in gas prices to the government’s announcement that it would back up Fannie Mae, Freddie Mac and the SEC’s ban on short-selling. The problem didn’t stay in America though. It didn’t take long for investors to see that the European market, the Japanese markets and other strong markets would soon follow America’s lead. Because of this, the value of the dollar was increased as investors around the world sought the “safety of our government’s debt.”
The final reason why we saw such a drop in oil prices is because Americans stopped using as much energy. As American demand of oil dropped, oil inventories rose. Instead of there being somewhat of a shortage, in terms of inventories, there is now a surplus of oil.
The weakened economy has forced Americans to change their behavior. Experts say that it is still too early to determine what will happen next year, in terms of oil prices. Some people expect oil to remain around $100 per barrel throughout the next few months. Here is the latest long-term speculation…”even low case oil demand trajectories leave no spare capacity at all by 2015.
What does this all mean? Go ahead and enjoy your SUV for as long as you possible can.