• Oct 7th 2008 at 7:58AM
  • 43
Simply put, the U.S. economy is in the crapper. Stocks are yoyoing and our mortgages are a fraction of what they were even a year ago. For all that's fiscally wrong here in the States, there is one pleasant side effect: the price of a barrel of oil is dropping faster than Kimbo Slice against a two bit hack. Oil dropped 6% in trading on Monday, bringing down the price of a barrel of crude to $87.81. Black Gold has been on a downward trajectory since July 11, when it peaked at $147 per barrel. Since then, demand has weakened both in the U.S. and China, with demand slacking so badly that the Communist government hasn't purchased any oil in two months, and it's even selling some of its stockpiles.
While demand for oil is down to where it was eight months ago, OPEC is watching with a wary eye. The oil consortium, which on several occasions has increased oil production over the past year, is likely to slash production when it meets again in December. In the short term, industry experts are predicting that gas prices will drop below the $3 mark by November 1, which will make for one piece of good news in an otherwise lousy news cycle.

[Source: Reuters]

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    • 1 Second Ago
      • 7 Years Ago
      After a quick glance online I couldn't find the data, but does anyone know what the average price at the pump was when crude was previously at $90 per barrel? I'll bet it a lot less that the $3.50 I'm seeing here in So Cal.

      It's verrrrrrry interesting how quickly the price at the pump shoots up when crude goes up and how long it takes to see a drop at the pump when it goes down. Looks like "someone" is making a bundle off the "float"...
        • 7 Years Ago
        It might be very interesting, but it also makes complete sense.

        Prices tend to drop more slowly than they go up for a couple of reasons.

        For one, it allows the stations to make a little bit of money on the transaction. When prices are high, their profit margins become even more slim and often they are selling gas at a loss. They make more money selling chips, drinks, and nachos etc than they make off of selling gas. Looking at it from a current standpoint, they are making up for the past 6mos or so when they weren't making really anything on the sales of gas.

        Look up all the news stories of gas stations closing down and oil companies even selling huge numbers of gas stations. SOme of the stories were even on AB. It's not a profitable business to be in right now.

        As for a second reason, stations become more competitive at higher prices. That's partially related to the first point I made above. When prices are high, people are more apt to shop around for the lowest price. So, stations don't have the luxury of tacking on a few more cents to the price in order to protect their profit margin. They are competing more heavily with every other station around them since consumers are looking to save every cent they can. When prices are lower, consumers don't tend to be deal-shoppers as much.

        I see it myself all the time. About 3 blocks from my house is a station that routinely has the lowest prices around and often this summer, there was a line out to the street. But, no more than 2 blocks away, there is another station that is typically about 2cents higher and I've never seen it packed. Nevermind the fact that 2cents is fairly negligible(less than 50cents per tank in most any vehicle) and the other station presents less of a hassle, people still packed the cheaper station.

        Third and probably most important, the stations have to buy gas too. Stations typically pay for their shipments when they receive them. So, that means that if oil prices rise, you know as a station owner, that your next shipment of gas will cost more so you generally will have to raise your prices in order to have the available funds to pay for the next shipment. So, that increase is likely to come right after an increase in the price of oil, not 2 weeks or a month later.

        On the other hand, when prices are falling, the haste is no longer there since you can likely be sure that your next shipment won't cost more than the last one. So, you can afford to sit on the higher prices a bit longer for reasons stated above. You might still choose to lower them, but the changes aren't probably going to be as dramatic as they would be on the upside.

        There was a great article on MSN about this over the summer as well, I just don't have the link right now.
        • 7 Years Ago
        Oil hit $90 in February 08 on the way up.
        In Feb. gas went from $3 to about $3.30 for reg. unleaded, retail, Natl average. Today's avg. is $3.48. Give it a week...
      • 7 Years Ago
      So, I guess it will be right back up there in the summer.

      • 7 Years Ago
      "the price of a barrel of oil is dropping faster than Kimbo Slice against a two bit hack."

      great line there.

      • 7 Years Ago
      so that means that in the future gasoline pricing will decrease? not a chance...
      • 7 Years Ago
      as of 8:13 am its up to $90.80 way to jinx it autoblog
        • 7 Years Ago
        Those greedy OPEC bastards are just going to cut production to increase the demand on the short supply. They'll try to keep oil above $100 a barrel and keep ripping us off.
      • 7 Years Ago
      down to 2.88 in parts of south jersey last time i was down there. 2.96 in jersey city right across from nyc. too bad that stupid toll is $8 and you get the gas penalty waiting to roll 10 mph through.
      • 7 Years Ago
      It's $3.75 a gallon here in North Carolina.
      • 7 Years Ago
      Here in wetern Canada we are still paying $4.70 us per gallon,that is $5.50 per canadian gallon. AND we have a refinery 5 miles from my house!!!! Our economy here is very, very strong so they keep the price of gas very very high.
      • 7 Years Ago
      Now we can only hope that the US masses are less like Bart Simpson in Lisa's zapping cupcake test, and more like the hamster-- painfully but quickly learning its lesson.
        • 7 Years Ago
        Yeah, but unfortuantely cheap(ish) gas + massive rebates on trucks and SUVs = short memories.

        And since we're tallying geographically, it's about $3.25 for regular just outside of Boston.
      • 7 Years Ago
      Cash price here (R22, NJ) was 2.99 yesterday.
      • 7 Years Ago
      It's down to $2.93/g in Des Moines, Iowa.

      "The oil consortium, which on several occasions has increased oil production over the past year, is likely to slash production when it meets again in December."

      If prices are going down because demand is down, won't "slashing production" just raise the price per barrel? Why would that benefit anyone but the oil companies?
        • 7 Years Ago
        "Why would that benefit anyone but the oil companies?"

        You just answered your own question.
        • 7 Years Ago

        You probably would if they still made Lightnings.
        • 7 Years Ago
        you dont seem to understand that OPEC doesn't have our best interests at heart. This is why we have to get weaned off oil. This is a good time to do it while the prices are low so it won't hurt as much.

        I'm guessing I'll see more Lightnings and GT500s on the road now though.
      • 7 Years Ago
      It has been $3.4 a gallon (gasoline) for more than one week now in Metro Detroit.
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