Tuesday, August 9, 2011
As I write, WTI oil prices are down to $75/barrel. The above graph shows the historical relationship between US average retail gasoline prices and WTI spot prices. The vertical orange line is the $75 level the market touched today. As you can see, historically this corresponded to gas prices of $2.50-$3/gallon. It might take a while to get there, but if oil prices stay in this range I would expect gas prices to fall down to those levels. That would provide some significant relief for low and moderate income consumers in the US. (Wealthy consumers are presumably about to significantly limit their spending after watching what happened to their portfolios the last couple of weeks).