Over the course of a few weeks, the average price for regular gasoline has dropped over 20 percent from the record highs of post-Katrina Labor Day. The price for a gallon of gasoline in Starkville has fallen more than 60 cents in the past month, from nearly $3 to around $2.30.
Crude oil prices have also dropped considerably since Katrina. During the aftermath of the hurricane, the price for a barrel of crude oil peaked at $72. Now, after damaged refineries have been repaired and the panic from the storm has quieted, the price of a barrel of crude oil has dropped to $60.
The decline in prices is a sign of relief for many Americans-a sign that some thought would never come.
“I didn’t expect such a sudden downward slope in the prices,” senior business information systems major T.J. Crane said. “Statistically it falls very far from a standard deviation.”
Many students find the drop in prices a life-altering issue. The price of gas makes it difficult for some to be financially effective, Crane said.
“People on fixed incomes can’t plan for consumption or savings because they can’t plan what they are going to spend on travel due to the fluctuating gas prices,” he said.
The recent decrease in gasoline prices can be attributed to many factors, Rudy Rogers, professor of chemical engineering at Mississippi State University, said. “The reason prices have gone down is because some of the refineries have come back on stream,” he said.
Other factors include increased imports, Americans consuming less and the drop in crude oil prices, he added.
“It’s an intricate balance of supply and demand. About 50 percent of the price of gas is due to crude oil prices. 30 percent is due to taxes. The other 20 percent is due to transportation, marketing and the profit of the retailer,” Rogers said.
What most people don’t understand, Rogers added, is that the complaint by citizens that oil companies are price gouging only hurts the efforts to solve the problem. The oil companies do not determine the price of a barrel of oil-the world’s demand does, he said.
“The most important factor, by far, is going to be the spot oil price, which is determined in world markets,” assistant professor of finance and economics Jon Rezek said. “What happens on world markets in terms of the price of oil eventually shows up in the price of gasoline. The lag tends to vary. If the price of a barrel of oil goes down 10 percent, you will eventually see a decrease in price of gasoline.”
In the short term, there is nothing Americans can do to keep gas prices down, Rezek said. The long term holds more promise, though.
“In the long run, conservation, a reduction of demand, will push prices down. If we were all to purchase more fuel-efficient vehicles or walk more, essentially drive less, but it’s more of a behavioral thing.”
Rogers agrees that long-term conservation must be planned but doesn’t think that the world can replace the use of crude oil and natural gas in the immediate future.
“I don’t think it will happen in our lifetime,” he said.
Crane said the precarious fossil fuel situation should spur America to really develop the technology needed for alternative sources of energy.
“I think our restriction of oil at the moment should force us into looking into alternative sources of power like hydrogen, electric and hybrid vehicles. The unstable nature of gas prices themselves makes our economy unstable,” he said.
Gas prices may continue to fall, Rogers said.
“I’ve really never seen anybody who can predict crude oil prices. I think the consensus would be that we might see gasoline at $2 or less in the near term,” he said. “But it is impossible to know for sure.”