Did You Know That Oil Prices Are Heading Downward -- Fast?

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gas pricesWhen gasoline prices began to spike earlier this year, the popular opinion was that oil prices would continue to climb into the peak summer travel season.

So much for popular opinion.

Crude oil futures have taken a hit lately, delivering an 8.6% slide to speculators over the past five trading days. On Tuesday, June crude settled at a three-month low, due in part to fears about Europe's financial crisis erupting into another economic setback and stifling global oil demand.

Obviously a sharp one-week drop isn't the last word on where oil prices are ultimately heading, but the news is likely to be good for your pocketbook.

How Much Cheaper Are We Talking?

After five weeks of surprising declines, the U.S. Energy Information Administration is revising its forecast for average gasoline prices during the summer driving period. The EIA is now targeting an average cost of just $3.79 a gallon. The original forecast called for an average of $3.95 per gallon.

This is obviously welcome news to drivers, but it's still worth cheering about even if you don't have a car.

From food to clothing, how do you think merchandise makes its way to a store near you? Transportation costs are baked into the prices that you're paying as a consumer, and lower oil prices should help.

There are also many industries celebrating the recent decline in energy prices.

Retreating gasoline prices are good for hotel chains and amusement park operators, since drivers are less likely to put off summer road trips if gasoline isn't going through the roof.



Since jet fuel is a major component of an airline's operating costs, airlines often have to bump rates higher as fuel costs climb. The same works in reverse, although falling prices don't apply to those who bought their tickets earlier. Cruise lines also rely on oil, and dips in oil prices can turn a loser quarter into a profitable one.

Most consumers and companies agree that falling gas prices are good. They put more money in the wallet of the penny-pinching driver. The cheering isn't unanimous, though.

Not Everybody's Excited About Lower Gas Prices

ExxonMobil (XOM) -- the country's second most valuable company -- benefits from the higher prices as long as drivers don't cut back on their consumption. The same can be said for many of the energy producers.

General Motors (GM) is another company that also wouldn't mind higher fuel costs. It would help the automaker move more of its plug-in Chevy Volt cars, which have been hard sellers in recent months. Given the fuel efficiency of most newer cars, one can argue that automakers would benefit from folks trading in their older gas guzzlers as fuel prices inch higher.

However, at the end of the day, the cheering squad for lower fuel prices is larger and louder. Over the past few weeks, the consumer's been winning.

Longtime Motley Fool contributor Rick Munarriz does not own shares in any of the stocks in this article. Motley Fool newsletter services have recommended buying shares of General Motors and ExxonMobil.

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52 Comments

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.kowalski440mag

Yes.....to the headline, but I'd be happier to see gas prices coming down fast. Should be below $2.90/gal by now,.

May 11 2012 at 10:48 AM Report abuse rate up rate down Reply
alscotti57

if barry had a pair hes cut loose 50 bbl. from the reserves drive oil to 60bucks and put a hurt on the speculaters

May 11 2012 at 9:51 AM Report abuse rate up rate down Reply
ha6ai

Targeting "just" $3.79/gallon! Wow, good job Obama! LOL!

May 11 2012 at 6:05 AM Report abuse +2 rate up rate down Reply
celtcalgal

When will it finally dawn on the American people that the President (any President) has no sway on oil prices, these prices are dictated by O P E C and other oil conglomerates, please educate yourselves people.

May 10 2012 at 10:51 AM Report abuse +3 rate up rate down Reply
Jeff

One reason is, go down oil prices or the world goes into another recession. Besides, 15 cents lower will make no affect on my driving thoughts.

May 10 2012 at 9:20 AM Report abuse +2 rate up rate down Reply
cpo1514

Huffy...You all really need to address why the oil futures are declining. Perhaps the increasing week-to-week new unemployment claims may give you a clue. Factories use energy, people drive to work, trucks, etc move finished goods. Huffy... see the correlation yet??? When factories dont run, people dont work, goods dont exist to get delivered and there is less demand for oil. Now go have a very OH bama day!!!!! Occupy a seat in Economics class and get an education.

OMG... OBAMA MUST GO !!!!

May 10 2012 at 9:01 AM Report abuse rate up rate down Reply
2 replies to cpo1514's comment
itacurubi

But, of course, the price of oil depends upon the world balance of demand and supply, not the balance in a particular country ... even if that country is the US; so it's a bit hard to see what this has to do with Obama. And since total employment (and GDP, for that matter) has actually been increasing in the US for 26 or so months in a row, your analysis of the US picture seems -- at best -- wildly superficial. Perhaps you ought to have done more than simply occupy your seat.

May 10 2012 at 9:46 AM Report abuse -1 rate up rate down Reply
1 reply to itacurubi's comment
cpo1514

Itsa....

Must be easy to ignore reality when wearing the Obama blinders and drinking the Kool-Aide. The incorrect 'facts' you state on GDP increasing over the last 26 months (or so) confirms that your understanding of economics is inaccurate at best.

Rather than point out the flaws I would suggest that you work on attending classes on trade and the economics of global supply & demand and finance.

May 10 2012 at 10:03 AM Report abuse +2 rate up rate down
chris1011

Large fleets are switching over to CNG because of the huge supply of natural gas now available at rock bottom prices. This will put downward pressure on oil.

May 10 2012 at 11:05 AM Report abuse -4 rate up rate down Reply
marine1942

Did Obama go over to Saudi Arabia and bow down again ?

May 10 2012 at 8:59 AM Report abuse +2 rate up rate down Reply
Robert & Lisa

Obama is letting our stategic oil reserves draw down to temporarily lower oil and gas prices. Wait until he gets re-elected and see where they go. $20 a gallon anyone?

May 10 2012 at 8:15 AM Report abuse rate up rate down Reply
1 reply to Robert & Lisa's comment
itacurubi

False.

May 10 2012 at 9:46 AM Report abuse +1 rate up rate down Reply
k4jlp

Follow the money of hedgers like Goldman Sachs, always using lame excuses of why there "might be" problems with the supply of crude/gasoline. Stock piles are at 22 year highs and they still want every last penny of your money. Combine that with wages that have not rose in 40 years along with increased out of pocket health care cost, no wonder we are PISSED....pay back is a BITCH.

May 10 2012 at 6:48 AM Report abuse +1 rate up rate down Reply
Mark

Ok so when will it drop significantly at the pump? At 96 a barrell last time the pump price was around 3 and change give or take. Why is it still close to 4 now? Who's screwing who. Want the economy to turn around? Go after the oil companies who make billions in profit while we try to scrape up our last pennies to put some gas in the car to try to get to work....or find a job even. Bullsh.. They know we HAVE to drive and have us by the bal.s. Oops, pardon my spelling mistakes, I couldn't afford the gas to drive to school.

May 10 2012 at 5:35 AM Report abuse +4 rate up rate down Reply
2 replies to Mark's comment
cpo1514

Mark... oil companies maintain a profit margin.... so does the Obama Volt... perhaps we should borrow money (increase the National debt) to help subsidize you fuel usage???

OMG !!! OBAMA MUST GO !!!!!!!!!!!!!!

May 10 2012 at 9:04 AM Report abuse -1 rate up rate down Reply
1 reply to cpo1514's comment
chris1011

The Volt was designed and developed in 2005 when Bush was president.

May 10 2012 at 11:02 AM Report abuse +1 rate up rate down
itacurubi

The US is exporting refined fuels -- including gasoline -- at volumes not seen since the late 1940s, when were a major oil and fuel exporter. Increasing foreign demand for gasoline combined with limited refinery capacity has led a number of countries to buy gasoline refined in the US ... and they're simply willing to pay the price. Again ... domestic prices are not very much determined by domestic supply and demand. Oil and to a growing degree gasoline prices are determined by world supply versus demand.

May 10 2012 at 9:51 AM Report abuse rate up rate down Reply