September 27, 2012

Gas prices won't fall as quickly as cost of oil

The Associated Press

Not so fast. That's the message for drivers hoping a recent drop in oil prices will soon show up at the gas station.

click image to enlarge

Gas prices have remained stubbornly high even though economic growth is tepid and demand for gas is lower than a year ago.

The Associated Press

Oil prices have dropped by $9 per barrel, or 9.1 percent, in less than two weeks. Gas prices tend to lag changes in oil, but experts don't expect a significant move lower until the middle of October.

Oil ended at $89.98 on Wednesday, down $1.39, or 1.5 percent. The national average price for gas was $3.805 per gallon, a record high for this time of year, and up 31 cents from the same date last year.

Gas prices should be at a record for early October when President Obama debates Republican challenger Mitt Romney next week in Denver. The focus of the debate will be the economy and domestic policy. High gas prices usually cut into consumer spending, which accounts for about 70 percent of economic activity.

Gas prices have remained stubbornly high even though economic growth is tepid and demand for gasoline is lower than a year ago. Prices rose about 25 percent from late June through late August.

It probably will be a few more weeks before supplies build back up in certain markets and lead to a noticeable decline in pump prices, said Tom Kloza, chief oil analyst at Oil Price Information Service.

He predicted that gas prices would drop into a range between $3.25 per gallon to $3.50 per gallon by Thanksgiving.

 

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