Gas prices currently stabilized

Tyler+Dailey%2C+a+senior+in+Engineering%2C+fills+up+his+SUV+at+the+Mobil+gas+station+an+First+and+Green+streets.+Dailey+says+he+hopes+low+prices+persist.+Erica+Magda%0A

unknown

Tyler Dailey, a senior in Engineering, fills up his SUV at the Mobil gas station an First and Green streets. Dailey says he hopes low prices persist. Erica Magda

By Alison Lacey

After the high gas prices of spring and summer, the price of gas has since continually dropped, currently hovering around $2 per gallon in Champaign.

“I feel good about the prices,” said Champaign resident Christine Vogt. “But I’m living in fear of them going up.”

Mattias Polborn, University economics associate professor, said the drop in crude oil prices traces its way back to two causes, one of them being the United States’ current economic crisis.

“We may well be looking at the worst economic crisis since the Second World War, and oil demand goes down whenever manufacturing output decreases,” Polborn said.

The other cause is the rupture of what Polborn called the “bubble” in oil prices during the spring and summer.

Polborn said gas prices were as high as they had been earlier in the year not so much as a result of a higher demand for oil, but because prices were expected to rise to around $200 per barrel. As a cautionary action to what could have been a serious problem, oil traders bought oil at $130 or $140 per barrel.

“Once it became clear that this would not be happening very soon, these traders had to unload the oil that they had accumulated, and that put additional downward pressure on the price,” said Polborn.

Consumers like Vogt say that they continue to pump gas with both elation and fear, in hopes that the prices will not rise again anytime soon.

“I fill up every time I go down a quarter tank,” Vogt said.

Daniel Bernhardt, University economics and finance professor, said Americans can expect low prices to stick around for a while.

“Low prices are here until the economy picks up – at least six months, one can safely say,” Bernhardt said.

Polborn said he had expected barrel prices to eventually drop back down to the $100 price range but was slightly shocked when they dropped all the way down to $60.

“I’m really happy to fill up for less than $2 per gallon, and I don’t think gas prices will go much lower, but they might stay at this level for some time,” Polborn said.

Bernhardt took a slightly different view.

“Who knows. If the economy continues to weaken significantly, prices will fall further,” Bernhardt said.

However, the outlook for the not so immediate future, a few years from now, does not necessarily have the same guarantee.

“Over the medium term, say three to four years, I don’t think it is implausible that we will return to the price level in summer,” Polborn said.

With an increasing demand for oil brought on from development in countries like India and China, oil prices, and subsequently gas prices will begin to rise.

“If you think of buying a car today, you should still think of the gas mileage as if the gas price were $4,” said Polborn.

“Because that’s likely the average price over the next five years.”