The high cost of fuel has been directly blamed for much of the nation's economic woes over the past year or so. But, the recent economic turmoil has brought with it one significant piece of good news. Gas prices are tanking, going from $147 a barrel three months ago to under $80 a barrel this week. The result has been significantly lower prices at the pump with consumers who spent over $4 a gallon just a few months back now paying about a buck less.
Chris Lafakis, an economist at Moody's Economy.com, told Time magazine that the average price of oil in the third quarter was $117 a barrel. If the number came down to an average of $80 a barrel for this quarter it would deliver $40 billion in savings to the American economy. That is equivalent to a third of the economic stimulus package that showed up in the form of checks from the Treasury Department to U.S. taxpayers earlier in the year.
Mary Novak, managing director of energy services for the economic consulting firm Global Insight, said crude oil prices should drop even more although it doesn't always add up to good news for consumers.
Ms. Novak estimated that 60 percent of gas consumed in the U.S. happens as people commute to and from work. With unemployment expected to continue rising, "you're going to get a significant downturn in motor-fuel consumption," she said.
Further declines in consumption would mean a "continued huge [downward] pressure on oil prices," Ms. Novak added.
Discussion Question: Will lower gas prices mean a change in consumer behavior and what impact, if any, will it have on retail operations?