Consumer

Oil Prices Down, But When Will Gas Prices Follow?

Market Experts Don't Agree On The Answer

CHICAGO (CBS) ― You may have heard that oil prices are way down, but if you filled up your tank today, you know that gas prices are as brutal as they ever were.

As CBS 2's Susan Carlson reports, oil prices have been dropping like a rock from a tall building lately. This month, we have seen the most severe plunge since the early 1980s.

Over the past week, oil prices fell by nearly 11 percent. On Friday, prices rose modestly again, above $131 a barrel, as news of an output cut in Nigeria helped to halt the sharp decline.

"It's been an incredible drop, unlike anything we've seen in a lot of years, and it probably means great things for Chicago consumers," said Phil Flynn, Vice President and Senior Market Analyst for Alaron Trading.

Part of the reason for the drop in prices is a decline in demand. Prices at the pump are so astronomical that some people have just quit driving.

"With gas prices so high, the only way I can get around is riding my bike," said frustrated consumer Phillip Walter.

"I guess I don't drive as much now," added Kirk Vuknoich. "I take public transportation."

The drop in oil prices this month marks a 180-degree turn from the record-setting hikes in oil prices of recent months – if your job is trading oil futures, at least. If you are just a person who fills your car with gas, it's the opposite. Prices at the pump have gone up.

AAA reports the average price per gallon of regular unleaded gasoline in the Chicago area is now $4.33 a gallon. That is compared to $4.22 a month ago and $3.40 a year ago.

"It seems like every day, the price is increasing, higher and higher," said frustrated consumer Gus Daud.

"Of course, it's annoying and aggravating," said Bethany Groff. "No one wants to spend more money than they have to."

We can blame the current sky-high gas prices on previous spikes in crude oil.

"Gasoline stations and the refiners, the people who are making the gasoline, weren't able to pass along all the cost of the price increase of crude to the consumer," Flynn said.

So we are stuck in payback mode, but perhaps not for long. Some analysts say it could turn around as early as the next few weeks.

But others are not so optimistic, says Flynn.

"Some experts say no way. The refiners are going to be able to hold off until the end of the summer, and prices are going to stay strong," he said. "But I'm more optimistic."

The bottom line is that lower crude prices will mean lower oil prices. Eventually.

CBS 2's Susan Carlson and the Associated Press contributed to this report.

(© MMVIII, CBS Broadcasting Inc. All Rights Reserved.)

---