Oil prices are on the way down again; will gasoline prices follow?

The price of oil is tumbling again, rattling an already-shaken oil industry and heralding lower prices for consumers. The price of oil fell 10 percent this week, approaching its lowest price in six years. Many expect it to fall further in the coming weeks because supplies are rising and the summer driving season is still months away. The lower crude prices will mean gasoline prices will slide lower in the coming weeks, and many drivers will likely pay under $2 a gallon in the summertime for the first time since 2004. Oil prices had appeared to stabilize in a range nearly 15 percent higher than the depths they had reached in late January. But on Friday the International Energy Agency called a recent rise in oil prices a “head fake” and a “facade of stability.”

The rebalancing (of supply and demand) triggered by the price collapse has yet to run its course.

The International Energy Agency, in its monthly oil market report

Oil has collapsed from over $100 because rising global supplies — especially in the U.S. - outpaced weak demand. The increase in U.S. production last year was the third-biggest one-year increase in the history of the global oil industry, according to BP. That has pushed oil levels in storage to their highest ever in the U.S. and far higher than normal around the world. Analysts expect supplies to continue to build, forcing prices gradually lower, until refiners ramp up to make gasoline for the summer driving season. But analysts say price of oil could fall sharply - to under $40 a barrel and perhaps even briefly to $20 - if supplies grow so much that storage tanks fill up.

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