1. Money

Why Are Gas Prices Falling?

By

9/10/2006

Americans have been getting hammered at the gas pumps over the last year with prices topping out at $3.05 a gallon average across the country on September 5, 2005. With no end in sight, many people looked to give up their once popular SUV's and large trucks for more fuel efficient cars or hybrid vehicles that rely on both gasoline and alternative fuel sources. Following trends set by agricultural rich Brazil, some drivers went with flex fuel vehicles and blended fuels like E85 and biodiesel came to replace diesel fuel in much of the midwest. Those who could not go out and purchase a new automobile opted instead to look for any way to maximize their vehicles fuel efficiency.

Latest Developments

News of relief at the pumps came recently as gas prices fell around 21 cents over the last two weeks to a national average of $2.64 per gallon according to the AAA daily fuel gauge report. This recent drop brings the total down almost 40 cents since last month's $3.03 per gallon average.

Experts are looking at the current fall in prices to pick up steam over the coming months. One analyst, Tom Kloza of the Oil Price Information Service, has been so bold to state that prices between $2.00 - $2.50 per gallon can be expected in time for the Thanksgiving holidays. With Des Moines, Iowa boasting a national low average of $2.32 a gallon, Kloza's claims don't seem to be too far fetched.

Background

The recent spike in the cost of gasoline began around December of 2004 when the national average was at $1.44 a gallon. In one month's time, the cost per gallon average rose 20 cents and continued to rise from there topping out at the $3.05 peak in September of 2005.

Experts explained that the high cost of fuel was due mostly in part to the high cost of crude oil being charged by oil rich nations. As political tensions increased in the middle east region, a barrel of oil rose to over $75.00. But the cost of crude was not the only reason for the $3.05 high, that was the same time that the US Gulf region was devastated by an active hurricane season. Two major hurricanes, Katrina and Rita, shut down refineries to add to the already growing cost at the pump.

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