What's Fueling a Drop in Gasoline Prices?

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You might have enough money left over to buy a cup of coffee while you fuel up during your next pit stop, but don't be so quick to thank OPEC. The recent drop in gas prices — more than two cents a gallon in the last two weeks — isn't a trickle-down effect of last month's OPEC decision. Trickle-down isn't a fast process, and it's hardly possible that the oil production increase was finalized, the taps turned on, and supplies replenished enough to lower prices so rapidly just one month after the group's decision.

What this seems to be is a bit of stock market-style speculation, just as speculation drove the prices up before the OPEC decision. The prices are dipping prematurely in expectation of lower barrel prices, led by fierce competition among gasoline retailers to pull in customers by offering the lowest prices on the block. "If you want to be a price leader, you make the adjustment so people keep coming back," said TIME business editor William Saporito.

But don't expect the trend to continue. Although OPEC agreed to increase production by 1.7 million barrels a day, world demand for oil is on the rise, and this may gobble up the extra oil without a further price reduction. The booming global economy and developing nations' voracious appetite for energy has contributed to this growing demand, and last year's world consumption of 75 million barrels per day is expected to rise 2.4 percent this year, according to International Energy Agency forecasts. "Eventually prices will fall, but demand will rise, as it always does in the summer," Saporito said. This recent price drop was not the precursor to plummeting prices, but merely a minor flux. The full effects of OPEC's decision remain to be seen.