Will gas prices ever go down?

Gas is $$ Pictures, Images and Photos Filling up gas in your car has never hurt so much. The price of gas is so high that it is beginning to affect the amount of money people have to spend on other things every month. The biggest spike in price came when protests in Libya broke out a couple of weeks ago. Now people are thinking that gas prices will not go down at all and that this is the new normal.

It is virtually impossible to tell where gas prices will be in one or two months from now, let alone six months or one year. Analysts and experts are saying various things, sometimes the complete opposite of each other. What we can do is think logically about the situation and that may help us determine how gas prices will behave moving forward. As I mentioned above, the prices are especially high now because of unrest in oil producing Libya. However, Libya only accounts for a small percentage of global oil production. In addition, Saudi Arabia already said they are willing to increase their production to fill the gap. So basically, there is no supply shortage of oil and no sudden jump in oil demand.

The unrest in Libya, just like Egypt and Tunisia before it are all temporary events. They will likely pass in a matter of weeks or a few months at the most. Even if this continues to spread to other countries in the Middle East, every new government will still need to continue producing and selling oil to make money. Therefore, I think the prices are only high due to unwarranted fear. When gas prices rise suddenly due to fears resulting from issues like political issues, it is usually not a long term trend. Based on this sound logic, I think gas prices will go back down to where they were before the Libyan protests in about a month or two.

With this in mind, I would not make large purchasing decisions based on extremely high oil prices. Perhaps buying a sub-compact car when you really need a pick-up truck is not a good idea. When oil comes back down in a month or two you will be kicking yourself for buying that puny little car.