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As Oil Drops below $100 Motorists Wonder When Gas Prices Will Fall

Who says miracles can’t happen? After four straight days of steady decline, crude oil prices finally plummeted by nearly 9 percent on Thursday to US$99.80 a barrel – the first time it has been under US$100 a barrel for nearly two months.

But don’t start filling up your fuel tanks yet. Although the price of crude oil has been dropping in recent days, the cost of fuel at your petrol station remains impervious to these changes. In fact, the average pump price for regular gasoline has actually increased in the past couple of days for a number of US cities.

"Crude would have to stay around $100 for five to ten days before we see gas prices come down,” according to Darin Newsom, a senior analyst at energy trader DTN.

Historically, gasoline companies have also tended to expand their profit margins first before passing any savings down to the consumers.

ExxonMobil, for example, earned over $10 billion in the last three months – nearly as much as its total earnings in 2002. Furthermore, according to a report by The Hill, “every $10 increase in the world oil price (or 25-cent increase in gas price) yields nearly $5 billion more in profits posted by ExxonMobil alone.”

Not surprisingly, a study by the Pew Research Center showed that 31 percent of Americans blamed corporate greed among oil companies, speculators and oil-producing nations as the main reason behind high gasoline prices. A further 19 percent believed that high gasoline prices were caused by wars and unrest in the Middle East and Libya, while 14 percent blamed national policies for rising fuel prices.

Fortunately, there remains some cause for optimism. Most analysts believe that fuel prices have peaked and will soon drop off. Economists such as Carnegie Mellon University’s Lee Branstetter also remain confident that market forces will eventually counteract any artificially high fuel prices.

“While it takes much longer for price of retail products to adjust downward, eventually you do observe adjustments,” Branstetter said. “The forces of competition do eventually assert themselves."

Rising fuel prices has been a constant source of gripe for many individuals. But how does fuel prices compare to other common household products? Find out through the infographic below.

Fuel Price Comparison


By. Economywatch

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  • Anonymous on May 06 2011 said:
    Your 'gallon to gallon' chart is just a sham argument that provides more distraction and misinformation than any real data. Who the heck buys any of those things at the rate of 20 gallons at a time? Which of those products are produced at the rate of hundreds of millions of gallons a day? And further more... where is milk that expensive? New York city? In Anchorage, Alaska it's only $4.50 for the good stuff. It's only $2.79 in Bend, Oregon. I'm just a little tired of that 'straw-man'.
  • Anonymous on May 07 2011 said:
    Very interesting. On person who NEVER though that the oil price would fall lower than 100 dollars was my good self. Well, I guess that the OPEC people were in my favorite watering hole in Vienna most of the week, because otherwise they wouldn't have let that happen.I have one consolation though. The statement by Professor Branstetter doesn't make any sense at all.
  • Anonymous on May 07 2011 said:
    OPEC is not the only game in town for crude oil. And crude oil is not the only game in town for liquid fuels. And liquid fuels are not the only game in town for fuels. And fuels are not the only game in town for energy.Unrealistically high oil prices have been pushing investment in alternative fuels and power sources to the outer limits, and not many people have been paying attention.Coal to liquids, gas to liquids, biomass to liquids, and kerogens to liquids have barely gotten started. The coming of cheap and plentiful sugars from biomass will hit energy markets like a force 10 hurricane -- with or without scalable "sugar fuel cells."Small modular nuclear reactors, molten salt reactors using thorium, and other approaches to deriving energy from the atomic nucleus are due to hit power markets within 10 to 20 years. And so on. And virtually no one reading this has the slightest idea what I am talking about.
  • Anonymous on May 08 2011 said:
    I certainly hope that you are right Alfonso, and there is a good chance that you are, but not in the very short run. Frankly, I thought that we were on our way to the next big macroeconomic meltdown. Wouldn't it be wonderful if our OPEC friends concluded - as they should have concluded - that it is best for them and everybody else if the global economy climbs out of the can before they hit the accelerator again.

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