Gas Prices Finding Their Way Below $2.00 Per Gallon.

Posted by: David Kiley on November 5, 2008

Don’t look now, but some U.S. drivers are finding gasoline today priced at less than $2.00 per gallon.

How’d that happen? I was moved to check the national scene when I found gas prices at $2.05 at some stations in Ann Arbor, MI.

A quick look at local gas prices on www.mapquest.com, and I found $1.94 in parts of New Jersey, like the town of Malaga. $1.69 in Mason, OH. $1.75 in Independence, MO. $1.71 in Laredo, TX.

According to www.eia.doe.gov, the national average this week is $2.40 for regular gas.. On the west coast, the average is still around $2.70. But obviously there are better bargains to be had.

The feelings among automakers are mixed. Such a huge drop in gas prices means the equivalent of an extra stimulus package for beleaguered consumers. While all the automakers have smaller, fuel efficient cars in the way, the Big Three U.S. automakers and their dealers still have a lot of heavily incentive laden SUVs and pickup trucks to sell. The drop in gas prices, combined with a new round of even more aggressive prices on these vehicles in the next two months could move a bunch of inventory off the lots.

The problem will be the availability of credit. Even if people want to take the plunge on a Ford Explorer, or Saturn Outlook while gas is hovering near $2.00 and take advantage of thousands of dollars in discounts, they might have trouble getting the loan unless their credit score is A+ perfect.

Ford, for one, is not overly concerned that the gas prices will derail in any way the company’s plans for a new group of small and smallish-mid-sized vehicles. “Yopu certainly can’t plan a future product plan around this month’s gas prices,” says Ford’s chief sales analyst George Pipas.

Oil dropped nearly 7 percent to below $66 a barrel on Wednesday after a U.S. government report showed rising fuel stockpiles and slowing demand in the world’s top energy consumer.

Gasoline stocks rose by 1.1 million barrels last week, against analyst forecasts of a draw, as demand for the fuel fell 2.3 percent over four-week period to October 31, the Energy Information Administration said.

Reader Comments

Paul (Vw)

November 5, 2008 2:33 PM

I wonder what the impact will be on ethanol as gas prices drop. Also, what will the impact be on all the corn growers? Will food prices fall?

Will hybrid sales stall?

How long will gas prices remain low? OPEC can't be too pleased by this and is acting to try and remedy it.

Paul (Vw)

November 6, 2008 6:14 AM

Speaking of gas prices, is Chrysler experiencing some sort of a windfall now with their $2.99 guaranteed price for gas incentives they had?

Snoz

November 9, 2008 6:20 AM

There's a saying from the Furhrer that if you repeat an idea enough times people will start believing it. Self-serving Oil speculators with the help of many stupid media have repeatedly reported "Peak Oil;" developing countries, (citing ad nauseam, China and India) are demanding more crude than supply; and rebels are blowing-up pipelines; thirsty American SUVs are guzzling too much gas. Oil speculator would have you believe that OPEC control the price of crude. Not true. With so much instability in the Mid-east, every sneeze and gas belching sheik becomes an excuse for the Speculators to drive up crude prices. Fact: OPEC has max 30% of crude market and many of the members cheat, exceeding their oil quota as well as selling crude in the black market. But the ignorant masses are told to direct their anger at OPEC when in reality the culprit for high crude are the oil commodity speculators. Other excuses offered by the speculators: China and India's growing demand for crude. While both countries are using more crude, their imports have not tripled from one year ago. If oil demand of China and India is the major cause for high price oil, the recent collapse of oil price from $147 to $62 would imply that the economy of China and India have decline 50%, which means their economy has all but collapsed. The fact is that there's no massive unemployment or workers' riots in China or India. If oil demand of China and India have not tripled in the past year, what is the cause for the price of crude price tripling from $50/barrel to $147.00/barrel in less than one year? Try propaganda issued by the oil speculators and journalist feeding off the same trough. The oil traders drag-net the world for bad news to feed the media so as to breed fear about oil supply thereby driving prices upward. The oil speculation, like dot-com, and real estate, has now gone bust leaving a trail of carnage in its wake: banks failures, auto industry collapse, and working people bankruptcy. The real reason for the sudden decline of crude price is that many oil "positions" held by the imploded trading firms, BearStearn, Merrillynch and LehmanBros, had to be unwind. After nationalization of several companies, UncleSam is eager to unleash its share of oil positions. As to lower price of crude, the impact on Ethanol will be marginal because ethanol is the only viable additive for gasoline unless crazy people are inclined to bring back tetra-ethyl lead or MTBE, both friends of the mortuary industry. Let's clarify a misconception advanced by your friendly self-serving oil companies. Corn used in ethanol production is different from your mighty-good-eating corn-on-the cob. Furthermore, ethanol production uses only the sugar portion of the corn leaving the solids for animal feed. In conclusion, just as OPEC is helpless in controlling crude prices on its way up, it is equally impotent when prices are headed down. Market equilibrium prices vary within narrow range over time. When crude spikes to $147 in less than one year followed by a sudden collapse to $62 in less than 3 month, that is prima facie evidence of rampant speculation. But who cares? The "Fourth Branch" of government now has criscrossing board of directors with the major corporations. When the Big Boys are making oil money hand-over-fist, truth is the first casuality or takes a back seat.

Indiainfraguru

November 16, 2008 10:47 AM

It is the futures market which controlled the oil prices ,the investments for which were made by traders,oil company owners,financial institutions. The demand or usage of oil in any country didnot come down atall ,but the oil prices dropped to one third. what is the explanation the harward educated MBA/CEOs going to give now?
http://www.indiainfraguru.com

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