August 17, 2008

Gas price decrease

I have seen a few articles over the past couple of days regarding the "significant" drop in gas prices over the past few weeks. Here is one of the articles from CNN.

Although a 35 cent drop in prices does help the consumer, we need to put a little prospective around this so called "significant" drop.

The following chart is courtesy of Gas Buddy and shows the national average of gas over the past one year.

As you can see, although the price has come down from the peak around $4.12 / gallon, we are still about a dollar higher then last years price of $2.74 (or about 35% higher).

So how much does the 35 cent drop save individuals? Assuming the average driver logs 15,000 miles per year and the average car gets about 22 MPG, the annual savings works out to about $238 or $20 per month.

Don't get me wrong, we'll take the 35 cents. If for nothing more then the physiological effect of lower prices (look at the consumer sentiment numbers released on Friday). But as you can see, we still need to come down significantly to add back substantial dollars.