The recent drop in prices at the pump could pick up steam, driving gasoline sharply lower in coming months, USA Today reported Wednesday.
'We'll be closer to $2 than $3 come Thanksgiving,' Fred Rozell, a gas analyst at at the Oil Price Information Service, told the newspaper.
If that happens, prices will be inconsistent with a trend that started back in 1999.
Even if the current price spike is an anomaly, my highly complicated projection models--OK, I'm just eyeballing it--project prices to be in the $2.50 range into early 2007. That's not to say we can't have prices below the trend, just that if that happens, prices will be, well, below the trend (just as current prices seem to be above the trend started in late 1998 or early 1999).
How does the Oil Price Information Service explain the expected price drop?
Several factors are behind the recent declines: the end of the summer driving season, which reduces consumer demand for gasoline...
Woohoo, DRIVE LESS! works!*
...as well as, the end of seasonal federal requirements on gas that makes the cost of importing and refining it cheaper, the newspaper reported.
Overall gas consumption is down for the year, which takes the edge off wholesalers prices, who in turn are trying to get rid of the product.
Woohoo, DRIVE LESS! works!* Sorry, did I already say that?
Finally, petroleum traders, worried that high prices won't last, are anxious to sell their holdings, the newspaper reported.
Damned speculators...Oh wait, we can only blame them for higher prices, right?
I have one more explanation, regression to the mean.
*For those new to Env-Econ, "Drive Less!" is an answer to the question "What can we as consumers do to bring down the price of gas?" "Drive Less!" places the burden on drivers to take action. Gas prices are high because drivers are willing to pay high gas prices. "Drive Less!" and gas prices will fall.
