Could gas hit $1 a gallon?
As of Friday, the national average price for a gallon of gas had fallen below $2 for the first time since March 2005. The rapidly falling price of gas has created a unique situation, where for the last seven weeks, the wholesale price for refined gasoline has been lower than the price of crude oil. This means that refineries are losing money on every barrel of oil they turn into gasoline. This market condition is, of course, unsustainable, and may lead to an even greater cutback in refining capacity. All of this could be setting up the conditions necessary for another price spike in the future. Decreased gas prices will eventually encourage more driving, and decreased refinery capacity will decrease the supply of gas. However, due to the terrible economic conditions facing the nation right now, a substantial increase in driving habits will likely be deferred until better economic times. Photo credit.
