So far nothing has made Americans want to cut down on their driving more than $4 a gallon gas. Now that gas prices are back to hovering around $2.50, drivers have returned to the road. Crude oil prices have also dropped more than 50 percent from the highs they reached over the summer.While the effects of gas prices are immediate for drivers filling up their tanks, consumers may deal with the aftermath of higher prices through the winter. In some industries, pricing decisions are made based on estimates of future costs.
The airlines, for example, sell tickets based on how much they expect to pay for fuel, services andother factors. Even though fuel prices are comparatively low now, consumers may still be paying for the impact of the summer's high prices. Home heating oil is another fluctuating expense that may end up costing some consumers if they made the decision to purchase in July, for example, when it cost more than $4.50 per gallon.
Now, however, the price of a gallon is just under $3.
The Boston Globe suggests that these newly-lower prices may do more harm than merely erase the gains that were made when consumers tried to conserve energy to save money in the warmer months.
Tom Drennen, a professor of economics at Hobart and William Smith Colleges, explains the situation to the Globe. "We're being hit with a double whammy. Credit is so bad and the lots are overflowing with SUVs that people sold when prices went up, so now is a really good time to get a deal on an SUV."
As a result, not only may more drivers be back on the road, more people may be driving gas-guzzlers. In addition, if consumers are not demanding cheaper fuel alternatives, companies have less incentive to develop them. In the end, that may cost much more than $5 gas.
--Bridget O'Sullivan
