Gas Prices Headed Down, At Least For Now

This could be a critical week for the future of gasoline prices. Analysts say it all depends on what crude oil prices do, and whether traders become convinced that sky-high prices have cut into actual demand, the way it did three years ago.

What is known is that the average price of gasoline, as tracked daily by the AAA Fuel Gauge Survey, has gone down every day since last Thursday, when the average price peaked at $3.985, a cent and a half shy of $4. Today, the average price is $3.96 a gallon, down from $3.966 yesterday.

The price of oil, meanwhile, has been choppy so far in today's trading. At mid-day, it was up 3.26 percent on the New York Mercantile, putting the price at just over $100 a barrel.

But the price is sharply lower than where it started last week. Oil prices began a big sell-off last week, although no one really knows why. The drop in oil prices coincided with a broad decline in other commodity prices, including the price of gold and silver. The prices of those precious metals are rebounding today.

No QE3

It also coincided with the recent announcement announcement from the Federal Reserve that it would end its “Quantitative Easing” policy on schedule in June, meaning it would stop pouring liquidity into the money supply to stimulate economic activity. Many traders have regarded that policy as inflationary, and since it began oil and other commodities have been going in price while the dollar has been going lower.

Now the dollar is regaining strength against other currencies and, since oil is priced in dollars, some analysts think oil prices will climb only on the evidence of tightening supplies.

What does that mean for the future of gasoline prices? It's still too early to tell. But if enough traders become convinced the smart bet is on falling prices, chances are the prices will fall. How much, though, is anyone's guess.