Gas prices continue to sink

Renee Rosenow

$37.

The pump stopped at about that price when junior Tyler Gudex filled up his gas tank last week at $2.99 per gallon.

Drivers filled up their tanks for under $3 per gallon in Eau Claire early last week, and prices have continued to drop in the area.

Gudex was happy to fill up his gas tank at about $37, he said, instead of the usual cost of about $10 more.

“Lower gas prices really help when I go home for the weekend,” Gudex said. “I live in West Bend, which is about four hours away.”

Economics professor and department chair Wayne Carroll said the reason for the price drop lies in ordinary supply and demand factors. When gas is in high demand, the price goes up, when it’s not, the price goes down.

One of the biggest factors is the price of oil, Carroll said.

“If the price of oil goes down . it reduces the price of producing gas,” he said.

Carroll listed several other factors contributing to the price drop, including the weakening economy.

“If there’s a serious downturn or recession, economic activity is going to slow down,” Carroll said.

Carroll said last summer’s hurricanes threatened oil refineries along the Gulf Coast, causing a spike in gas prices, although the damage was not as widespread as some thought.

“A lot of oil refinery capacity was shut down – they thought it might get hard hit,” Carroll said.

Much of the oil capacity is just coming back online now, Carroll said, and that has increased the supply of gas in the last month or so.

Carroll said there is a good chance gas prices could stay low or continue to drop in the short-term. With prices dropping significantly, we might expect people to start purchasing more gas again and driving their cars more, Carroll said, but the threat of a recession means the opposite.

This will reduce the demand for gas and oil in the future, Carroll said, which generates an expectation today that the prices in the next couple of years won’t be as high as they were last summer.

A long-term trend is one that will continue to raise oil and gas prices, Carroll said.

Carroll explained that the trend is pushed by economic growth, which pushes the prices higher.

“Last summer we saw over $4 a gallon. It seems to really change people’s long-term expectations,” Carroll said.

Consumers just haven’t been spending as much at the pump. Consumption of gas went down about 5 percent last year, Carroll said.

Carroll also said people will most likely choose to drive less because of decreased incomes, despite the fact that gas prices might be coming down again. He said it will be interesting to see if people drive less because they are looking for alternatives, such as buying a hybrid car, walking or biking.

“It will be interesting to see if that long-term trend from last summer really sticks with us and gives us continuing reductions in gasoline consumption,” he said.

On Sunday gas was $2.89 at several stations in Eau Claire, and $2.94 at other locations around the state.