Finance Globe
U.S. financial and economic topics from several finance writers.
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Gas Prices Down to 12 Month Low
Stopping to fill up the tank isn't as painful as it has been in the past year; regular unleaded is now $2.80 a gallon here in my town, right at about the price it was in September 2007.
This is a big change from the record-high prices in mid-July, when regular unleaded cost well over $4 a gallon in many areas in the U.S. The lower gas prices reflect the sudden drop in the price of oil; light crude dropped to a 12-month low of $72 a barrel on October 15, down by 48% from its record-high of over $147 a barrel on July 11, 2008.
So what's the cause for the sudden drop in gas prices? The mess in the troubled financial markets take much of the credit in the sharp price decline, as a decrease in consumer spending reflects the worsening economic conditions around the globe. The strengthening of the U.S. dollar, the Gulf of Mexico's oil refineries ramping up production after escape from major damage by hurricanes Ike and Gustav, and consumers just cutting back on driving due to the high cost of gas in the past year also play a part in a lower cost fill-up for drivers.
Analysts played with the idea earlier this year that gas prices could have topped $5 a gallon, but that story is changing - at least for now. Experts now believe that we are likely to see a continued decline in the price of gas as long as the global financial markets are in a mess and consumers continue to be careful about their spending.
The Organization of the Petroleum Exporting Countries, which controls 40% of the world's oil supply, dramatically lowered its global demand forecast for next year. The OPEC October report states that, "the oil market could be considerably affected by the fallout from the recent financial turmoil on the real economy as it moves beyond the industrialized nations, which would considerably reduce demand for crude oil."
OPEC will hold an Extraordinary Meeting of the Conference on November 18 to discuss issues on how the global financial crisis may affect the demand for oil and whether they should tighten production.
Sources:
OPEC.org
This is a big change from the record-high prices in mid-July, when regular unleaded cost well over $4 a gallon in many areas in the U.S. The lower gas prices reflect the sudden drop in the price of oil; light crude dropped to a 12-month low of $72 a barrel on October 15, down by 48% from its record-high of over $147 a barrel on July 11, 2008.
So what's the cause for the sudden drop in gas prices? The mess in the troubled financial markets take much of the credit in the sharp price decline, as a decrease in consumer spending reflects the worsening economic conditions around the globe. The strengthening of the U.S. dollar, the Gulf of Mexico's oil refineries ramping up production after escape from major damage by hurricanes Ike and Gustav, and consumers just cutting back on driving due to the high cost of gas in the past year also play a part in a lower cost fill-up for drivers.
Analysts played with the idea earlier this year that gas prices could have topped $5 a gallon, but that story is changing - at least for now. Experts now believe that we are likely to see a continued decline in the price of gas as long as the global financial markets are in a mess and consumers continue to be careful about their spending.
The Organization of the Petroleum Exporting Countries, which controls 40% of the world's oil supply, dramatically lowered its global demand forecast for next year. The OPEC October report states that, "the oil market could be considerably affected by the fallout from the recent financial turmoil on the real economy as it moves beyond the industrialized nations, which would considerably reduce demand for crude oil."
OPEC will hold an Extraordinary Meeting of the Conference on November 18 to discuss issues on how the global financial crisis may affect the demand for oil and whether they should tighten production.
Sources:
OPEC.org
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