If you’re thinking about filling your car’s gas tank, you might want to wait. Gasoline prices have been dropping almost daily recently, bringing much-needed relief to consumers. Prices fell overnight to a new national average of $2.611 a gallon, according to the Oil Price Information Service and AAA. Here in North Carolina, prices are lower, thankfully. Two stations on East Innes Street in Salisbury were selling regular for $2.36 a gallon Monday evening, a nice change from June’s $2.50-plus.
That’s the good news. Overproduction by oil producers has created a glut, and finally the law of supply and demand is kicking in. Supply is up, demand is down, and the price drops.
The bad news is the reason for the drop: the continuing recession. As the Associated Press reports, oil prices tumbled to a five-week low of $64.05 a barrel Monday because investors fear the end is not yet in sight. The “green shoots” of recovery cited by Federal Reserve Chairman Ben Bernanke and many others have not convinced everyone. The Los Angeles Times quotes John Kilduff, an energy analyst with MF Global in New York, predicting that oil will not rebound until there is incontrovertible proof that a recovery is underway. “The market needs to see some tangible evidence that we are on the comeback trail economically. We’re not out of the woods yet,” Kilduff told the Times.
Consumers would like to have a recovery and low gasoline prices, too. In the spring we got just the opposite ó continuing recession and high prices. That baffled experts, because demand for oil products was down.
One thing’s for sure: There can be no recovery as long as rising gasoline prices are sapping personal wallets, business bottom lines and government budgets. A Money magazine headline from 2004 on the subject now sounds naive: “Will U.S. economy be oil-shocked into recession?” Oil prices are not entirely responsible for the current downturn, but they certainly have been an aggravating factor.
Very aggravating.