ALBANY, N.Y. (NEWS10) — They say don’t look a gift horse in the mouth, but it’s hard not to wonder how in just two months, gas prices have plummeted from an all time national high at $5.01 on average in June to $3.99 on Thursday, according to AAA.
UAlbany Distinguished Economics Professor Kajal Lahiri says every economist you ask will tell you a different cause for this favorable effect, but in his opinion, it all comes down to demand.
“Five dollars a gallon is not attainable for many households. They will look for alternative ways of reducing that cost,” Lahiri says.
He says compounding inflation fears with whispers of a recession has consumers squirreling away their funds, and companies are trying to predict how we’ll act in a crisis.
“A lot of oil prices are based on speculations, you know, the futures market. Recession fears are slowing down the economy fears are feeding back into the world price of oil,” he explains to NEWS10’s Mikhaela Singleton.
Lahiri adds government actions like eliminating gas taxes, releasing more reserve oil into the market, and increasing domestic production are also adding aid in the background, but nothing trumps demand.
He says that’s also a key reason why you’ll see massively different prices in the Capital Region. Some stations are at or below the national average while in Albany, AAA reports the average is still around $4.35.
“Location of the gas stations is very important, because location-wise, they pay more money for the rental of that place, and that’s one thing and another is of course the demand,” he says. “If your gas station is on a major road or intersection where a lot of people pass by or will come in and spend, the price will reflect that.”
Our expert also reminds us not to get too comfortable. Prices can change on a dime, especially as the Ukrainian war and the upcoming elections loom over our heads.
“Uncertainty always pushes oil prices up. Always it’s there,” Lahiri cautions.