Gas prices still falling
Published 7:47 pm Friday, November 21, 2008
Gas prices continue to fall around the country, much to the delight of motorists, but questions remain.
Why has gas suddenly dropped so low? And how long can we expect it to stay there?
Charles Newton of Newton Oil Company Inc. said he hasn’t heard any definitive answers, but he has some ideas.
“Crude oil prices continue to drop, and as they do that, it’s been reflected in the price of gasoline,” Newton said. “I’m not sure I’ve seen anyone that could explain the prices of crude and the factors involved in whether it goes up or down.”
Crude oil prices were down to $49.75 per barrel on Friday.
Meanwhile, the average price of gas per gallon in the area is $1.981, according to AAA.
The average price six months ago was $3.77, while last year it stood at $3.01.
“Hopefully we’ll continue to see the prices drop because I think the high prices were a problem in our overall economic problems,” Newton said. “Once prices got to $4 per gallon, it started stifling all kinds of business.”
“There are a lot of factors involved, and part of it is just the free enterprise system,” Newton continued. “These big companies set a price, and they find demand for that price. One possibility is that the price got so high that it just reduced demand. As the demand goes down, the price might go down to stimulate sales.”
The U.S. Department of Transportation issued a press release this week that lends some credence to that theory.
According to the Federal Highway Administration, revenue to the FHA has fallen because Americans aren’t driving as much.
During the 2008 fiscal year, Americans drove 90 billion fewer miles over an eleven-month decline in miles driven.
“I don’t know if maybe the discussion of alternative fuels have influenced those prices,” Newton said. “Perhaps that has influenced those that set prices to lower them to keep the market share.”
“This is a very complex issue that affects everything from gas cost to the cost of food, which is usually delivered by truck,” he added. “Prices were crippling us, and hopefully it will stay down.”