Prices

Watching the gas prices fall was nice, while it lasted. But the crude oil market has become more volatile in the last weeks causing gas prices to stabilize. The average of regular gas is at $3.79. The focus this week at the OPEC meeting will be in increase the output would justify the given situation. But the decision will depend on Saudi Arabis because they currently hold three quarters of OPEC’s capacity. Although price levels have declined slightly, these price levels have not been seen since 2008. When crude oil prices go above $100 per barrel, prices rise; if they fall below that we see a drop in gasoline prices across the board. The economic growth ultimately will lead to a reduction in speeding leading to lower fuel use and less of a demand. Although gas prices in our country are low compared to others, it is still a problem and is affecting our economy in several ways. Our economy is struggling from high prices at the pump, grocery stores and the employment field. We need better work opportunities to help with better pricing at the pumps and other areas. Our people are in a “poor” state but prices on everything keep going up and jobs keep decreasing. Something is wrong within the government if the oil companies are still showing a 16 billion dollar profit in one quarter yet the average working person is struggling to survive one paycheck to the next. Ron Scherer, April 18, 2011; The Christian Science Monitor; http://www.csmonitor.com/Business/2011/0418/Gas-prices-nearing-the-point-where-Americans-cut-back With gas prices being an average $3.83 a gallon consumers are close to the point they will start to cut back to pay fuel expenses. This will adversely affect all businesses from restaurants to entertainment. People may have money to spend but with gasoline costs at $4 a gallon, they are cutting back in response to the price. People are parking extra vehicles, carpooling, making fewer trips and may not be taking that family vacation. Economist say there is a potential for this bubble to pop. If the summer demand does not materialize, the price per gallon will fall quickly. Austin business journal, http://assets.bizjournals.com/austin/news/2011/05/06/economic-worries-send-oil-below-100.html, Barrett Goldsmith, Houston Business Journal Reporter, May 6, 2011 Oil prices affect the gas price and in turn affect the economy. Oil dropped per barrel since the middle of March. They are attributing the decline to a less demand for gasoline by the economy which is strengthening the US dollar. Although the change is not seen at the pumps yet, prices are expected to drop by the summer. The average gas price in Ohio is 4.19 a gallon. Oil prices began to rise around mid February until now. Economists stated the high fuel cost would take a toll on the economy. And it did. The demand for gasoline started to fall this past March. The job market employment or should say unemployment has added to the concern for fuel demand. “More and more people were saying that oil was just too high,” said Michael Lynch, president of Strategic Energy and Economic Research. The selling of crude for June at $99.80 per barrel was the lowest settlement since March. The Federal Reserve indicated it would help boost the economy with oil and other commodities. It first announced they were going to buy back treasury bonds, approximately $600 billion worth. By doing so they produced fear, weakened the US dollar and lowered interest rates. The extra money investors had was then put into grains, oil and other metals. The dive into oil may help to keep gas prices from hitting a national average of $4 per gallon. Gasoline prices have risen 30 percent this year and consecutive for 44 days so far. Economists are hopeful gas pump prices will drop to an average $3.50 by end of June. Along with this drop at the pump other energy supplies should fall. For example heating oil was up and has started to decline along with natural gas. “The commodity bubble may be beginning to break as others join us in thinking about a hard landing in China, falling US house prices, and troubles in Japan and the euro zone.” Economist Gary Shilling wrote in a report to clients this month. Other commodities like oil, silver and other raw materials are bought and sold in dollars. When the US dollar is weak these commodities look cheaper to foreign currency and when the dollar is strong they sell. This theory may be on explanation for the recent price drop in commodity prices because the US dollar is gaining strength on the foreign exchange market. If there can be a positive outlook on the global economic growth then there can be positive outlook on raw materials, bringing prices down. While gas prices continue to be a strain on the economy, some ways to help save at the pump are to slow down on highways. Most vehicles reach their peak fuel efficiency between 45 and 55 miles per hour. You begin to lose fuel efficiency with anything over 60 m.p.h. This may save you a gallon a week. Another way to help is to keep calm. Rapid acceleration and hard braking or aggressive driving can lower your highway gas mileage. Cruise control or scheduling work hours to avoid peak rush hours can help with commuting more quickly and better gas mileage. A final suggestion is to keep your tires at recommended air pressure. This is not going to increase mileage greatly but it will make the car safer and the tires last longer. The oil price per barrel has a choke hold on the economy. With the economy stalling, there are a few forces that may help bring it to an end. One is alternate fuels and technology. An alternate fuel would be natural gas. Hybrid vehicles are making a small but significant rise in vehicle sales. The second force is conservation. The high gas prices are impacting the auto buying market. People are looking at strategies to conserve energy because of high prices. The final force is exploration. Renewed oil drilling areas that were once unprofitable are being predrilled. Deep water drilling in offshore areas has allowed for a large deposit of barrels of oil and gas. These forces combined with other factors can help relieve the current situation.