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Could Gas Prices Have Reached Their High Point?

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Tim Hohm, Flickr

Gas prices have been a sour footnote in the public’s budget for awhile. However, there may actually be some hope in sight.

The rise in prices at the pump may have skyrocketed in just a couple of months, but the price is actually starting to come back down. AAA reports that the average price fell by a half-cent in one day to approximately $3.90 a gallon. The price also dropped by nearly four cents in a single week.

The price drop is mainly due to the moderate drop in crude oil prices in the wake of Iran’s decision to reopen negotiations with inspectors over its nuclear program, starting this weekend in Istanbul, Turkey. Iran has made threats to close the Strait of Hormuz where a fifth of the world’s oil travels through and closing it would cause a massive disruption in supplies. Also, the good news could turn bad in a second if Iran walks out of the negotiations without an agreement.

Other reasons for the dropping prices include Saudi Arabia’s vow to weather any loss from Iran’s oil blockage, the weak unemployment news that show the high prices are decreasing productivity and growth and a pipeline flow reversal from the Gulf of Mexico that will pump more product into the global supply. The pipeline alone, operated by Enbridge, could add another 400,000 barrels a day to the market.

[CNN Money]

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