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Oil Rises But Gas Keeps Sinking

OPEC looks to cut production, buyers want to increase inventories

December 29, 2008

The good news for consumers is gas prices keep falling. The bad new is oil's rise may signal prices at the pump may have reached a bottom, at least for a while.

The nationwide average price of self-serve unleaded regular dropped to $1.619 Monday, 21 cents lower than just a month ago and more than $1.40 cheaper than a year ago, according to AAA.

Wyoming has the cheapest gas in the nation, with a statewide average price of $1.453 a gallon. Alaska continues to have the most expensive regular gas, at $2.518 a gallon.

The price of regular gas is down almost $2.50 a gallon since it hit a record high of $4.114 in mid-July. That amounts to a huge "rebate" every time consumers fill their tanks, saving them $25 or more with every fill-up.

Gasoline prices fell in tandem with the steep decline in oil prices, but crude has moved higher in the last few trading days, in large part because of the renewed tensions in the Middle East.

Light, sweet crude for February delivery rose 31 cents to $38.02 a barrel on the New York Mercantile Exchange Monday, after a more substantial $2.36 gain on Friday. Still, oil prices are a shadow of their summertime presence, when the price of crude peaked at over $147 a barrel.

Analysts say China and other major oil consumers may take advantage of the current low prices to increase inventories, a move that could increase demand. Meanwhile, OPEC members have voted to cut back oil production, which would further reduce supply once the reductions are fully implemented.

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