Look for gas prices to drop
Date posted: June 8, 2011
Gas prices have begun to fall. Why? N.C. State University economist Mike Walden explains.
“I think as most people know, the biggest determinant of gas prices is oil prices. So really what we want to focus on is oil prices. And we have seen over the last couple of years really a march upward in oil prices. But over the last couple of weeks, something’s changed and oil prices have actually come down. They’ve come down from about $116 per barrel down to the low $90s. And if that holds, if we don’t get a rapid turnaround, if that holds we should see, we should see relief at the pump.
“The rule of thumb is that for every dollar change in the price per barrel of oil, you’ll see 2 cents change at the pump. So, for example, if we’ve seen roughly a $20 drop in oil prices, we could see at the pump eventually 40 cents come off that price per gallon.
“Now this won’t happen immediately. Again, historically, there’s usually a 7- to 10-day delay between the change in the price of oil and change in gas at the pump. But we are in a period now where oil prices are heading down. We should see that same thing happen to gas prices.”
Category: Economic Perspective