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Where Are Gas Prices Heading?

Gas Prices

When gas prices hit a national average of $3.92 a gallon in April of this year, most people expected a painful summer driving season of ever-increasing prices. Charting the prices showed nothing but a steady climb since January. And didn’t it always seem like gas prices jumped just in time for our summer road trips?

But then a funny thing happened: Over the following two months, gas prices dropped nearly as steadily as they had risen, to a national average of $3.37 a gallon. Drivers rejoiced, overall MPG of cars sold dropped, and the summer driving picture started to look quite rosy.

How to explain this sudden plummet in prices? For that matter, how to explain the previous run-up? It may take a doctorate in global economics to truly understand, but there are some possible reasons for the volatility, as told to The Detroit Bureau by GasBuddy.com’s Patrick DeHaan.

Prices rose because:

  • A refinery fire in Washington State reduced supplies.
  • Surging demand in emerging markets further stretched supply thin.
  • The hint of a U.S. economic recovery encouraged petroleum traders to bid fuel prices upward.

Prices fell because:

  • The U.S. economic recovery went slower than expected.
  • Americans are driving less than they have since 1997, and in ever more fuel-efficient cars.
  • The European economic crisis caused the Euro to drop relative to dollar.

So where do gas prices go from here? Will we see a continuing downward slope, or will prices start to ramp up again? Well, that’s the thing about volatility; it’s volatile. As reported by DeHaan, the stock market and commodities had a banner day last Friday, with oil prices having the biggest single day gain in three years. That caused the first blip upward for gas prices in weeks. Whether they continue upward or downward is anyone’s guess. There are simply too many unpredictable factors involved. Some advice: Enjoy them while they’re still low and hit the road.