Patrick DeHaan is a senior petroleum analyst at gasbuddy.com.
The national average for oil prices has been climbing for several weeks, albeit quite slowly, but recent reports have caused concern that the economy isn't as healthy as was thought. After a debt ceiling agreement was negotiated last weekend, oil prices rose to near $100/barrel. A debt agreement was viewed as good for the economy and thus oil prices gained. All that momentum quickly shifted as a key manufacturing report was released and caused investors to question the economic improvement we've seen.
Oil prices quickly gave up all of their earlier gains, headed down sharply, and continue to drift downward. Meanwhile, wholesale gasoline prices, the price gas stations pay for their gasoline before taxes, has fallen over 10 cents per gallon in many areas. While the recent drop in oil and wholesale gasoline prices won't show up all at once overnight, we can expect prices to slowly move downward as stations slowly pass along the drop in their cost. [See a collection of political cartoons on gas prices.]
For motorists, the timing of the news couldn't have been better. A debt agreement, which was viewed as bullish, could have boosted oil prices over $100 and caused gasoline prices to rise, but as a result of this key manufacturing report, prices will be moving in an opposite direction. In fact, the timing of this week's announcement may have shifted overall sentiment, and we may be in the midst of a month long (or slightly longer) downward trend.
One of the only limiting factors to this new downward trend could be hurricane season, and with the peak of the season coming up, we'll intently watch for any developments.