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Gasoline prices continue to fall

Over the past few months, crude oil prices have fallen over $45 a barrel.  For the last few years, crude has run about $105 a barrel and last week was $59.  Purdue University energy economist Wally Tyner anticipates prices continuing to decline.

The decline in prices has been enough to increase the US gross domestic product by around 1 percent.  And considering the GDP, the value of the nation’s goods and services, increases by a rate of 3 percent annually.

Tyner says that’s a huge boost to the economy and provides consumers extra income they can spend on other goods and services, which also stimulates the economy.

Gasoline prices have been falling primarily for several reasons:

* OPEC decided in late November not to cut production, a decision that sent crude oil prices tumbling further.

* U.S. crude oil production has increased by 1 million barrels per day in each of the past three years, Tyner said. “This U.S. supply increase is a major part of the current price story.”

* Production also has increased in North Africa and the Middle East. “Libya, for example, is now producing a lot more, but it is not clear how long that will last,” Tyner said.

* While the U.S. economy is doing well, the economies of the rest of the world are not. Europe and Japan are growing at less than 1 percent per year, and China and India are growing more slowly than normal. Russia is in recession. Tyner said that because oil demand is driven by economic growth, when the growth slows so does global demand for crude oil and products.