Would Idahoans Accept 4 Dollars a Gallon as the New Normal?
West Texas Intermediate crude dropped below 100 dollars a barrel. The lowest price per barrel since May. This happened earlier this week. You may ask if it’s a sign of things to come. We see a couple of things here. One is demand destruction, which means the high cost of gasoline is cooling demand and possibly easing tight supplies. A larger reason, according to many analysts, is fear of a recession.
A severe nosedive across the world economy could reverse the market and leave it with a glut of oil. Recall the summer of 2008? I was spending well in excess of four dollars a gallon for unleaded regular. By Christmas, I was paying under a buck fifty. Millions were also out of work and the future was very uncertain as we entered what came to be known as the Great Recession.
Let’s say prices drop a little and then stabilize. What would you then consider a bargain at the pumps? Four dollars a gallon? Clearly, it’s better than five and a half dollars and the nearly six dollars a gallon I saw last week while traveling. We may be conditioned for a much higher floor for a gallon of fuel.
If I’m selling you a product and I raise the price by two dollars for a prolonged period, then cut a dollar, you could believe you’re somehow catching a break.
It’s called conditioning. The new normal! The trade-off for really low prices may not be worthwhile. My dad told me gas was eight gallons for a dollar during the Great Depression. I was impressed until he told me nobody had any money.