Tumbling gas prices may represent a weakening economy - KMOV.com

Tumbling gas prices may represent a weakening economy

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By Joe Raedle By Joe Raedle

ST. LOUIS (KMOV.com)- Across the country the price of gas has fallen to $2.13. But it's even cheaper in the St. Louis area with some places seeing  prices as low as $1.99.

Crude oil prices are at their lowest level in more than five years. 

Since June, the price of foreign oil has been slashed nearly in half, to less than $63 a barrel. Domestic oil is even cheaper at just $59 per barrel. 

Those low prices are leading to change in the pockets for many drivers. 

"It's in essence a raise," says taxi driver Kelly Babin. "I get to spend more money on food, on necessities, put some money in the bank."

According to GasBuddy, the nationwide average for a gallon of gas has dropped nearly a dollar in the last three months to $2.53 cents per gallon. 

Greg Ip, an editor at "The Economist", compares the low gas prices to a change in taxes. 

"Lower oil prices are like a gigantic tax cut. You're going to see it flow through to the price of gasoline and that's going to put several hundred dollars per year in the pockets of US households."

The last time oil prices were this low was in May 2009, when the nation was still reeling from the global financial crisis.

Thanks to the shale oil boom, the US has become the biggest oil producer in the world, something that has helped lead to spiraling oil prices. 

"We now have a lot of companies and a lot of folks working in the shale oil industry," says Ip. "We're not going to be drilling as many wells as we thought we were because prices have dropped so much." 

Even with historic low prices, demand for oil in Europe and Asia remains flat, suggesting the world economy is weakening. 

The prices and weaker economy have contributed to the Dow Jones Industrial Average tumbling nearly 700 points last week. The drop is its worst in more than three years. 

 

 

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