Why are gas prices so low and why were they so high just recently??

[mismas]

I really do not understand who dictates the price of oil. I remember the price of oil to be somewhere at $140 / barrel in the summer, only a few months ago. Now, it is somewhere around $50 / barrel, that is 64% drop in only a few months.

I know I read the news too, the price of oil dropped because everyone expects lower consumption. But I do NOT believe the consumption dropped or will drop 64%. People still have to drive to work, school, shopping. So, how is it possible that the price of oil differentiates soooo much from the real value of oil?

[steven]

Everything is really about supply and demand. Everyone is nervous and spends less. It is not only the demand coming from gas stations but also investments. People spend less, people invest less into risky ventures like the commodities market. Oil prices went up before because everybody was speculating in oil futures. Now that people are not investing and average folks are trying to reduce their spending habits, the oil companies end up with a whole bunch of product that nobody is buying, so they drop the price so they can move their inventory.

[pawel]

Most Americans are driving less than they were several months ago. There is a huge glut of gasoline and oil inventories right now as a result.

The downturn in the US and European economies plays a role too. China is slowing down too. People in China and India are being laid off their factory jobs. As a result, they are pulling out the bicycles and riding them again.

[indian]

I have another explanation. SPECULATION Prices dropped so dramatically because the 64 billion that was driven into the oil futures at the beginning of the War in Iraq was pulled back out as recession fears cause massive sell-offs. The big guys start first, then the media massages the masses, then the masses start selling, the big guys make money again on shorts!

[porsche]

Hehe, I am glad at least someone here understands basic economics. Welcome to a very lonely club. Few words: Go to Europe and see what they pay, they pay > $5.00/gallon.

Listen to everyone whine about the price of gas "oh it USED to be so cheap!!" sob sob. Guess what, inflation sucks. Prices are set by demand, which means by you, YOU control the demand, so stop whining and sell your SUV. Especially you big bosses driving SUVs! WTF is wrong with you? You LIKE destroying the environment while simultaneously making life impossible for everyone else in smaller cars on the narrow, crowded streets?

[archangelofsex]

Gas prices are not set by demand alone, nor are they dictated by inflation or speculation alone. These are all factors in the equation that results in the gas price, but there is also the cost of production, cost of transportation, state taxes, and federal taxes. (In my state of washinton, where gas prices are roughly $4.00 per gallon the current tax burden account for 74.3 cents per gallon or 18.5% of the cost.) After all these factors there is the small matter of turning a profit for all those involved which ensures that they continue to do what they are doing to provide gas to you at your local filling station.

While there are those who look at profit like some obscene concept in fact there are no obscene profits, only obscene loses. If one examines the cost of gas in comparison to say the delivery of mail, one suddenly discovers how cheap gas truely is. For the US postal service to deliver a one once letter from your home to your next door nieghbor the cost is 45 cents. A gallon of gas weighs 7.15 pounds or 114.4 onces, so if the US post office were delivering gas to your neighbors house from your house the price per gallon would be $51.48 per gallon. Thank God the government isn't providing us with gas.