Experts: Low gas prices sign of bad economy

by Kelli Cheatham (kcheatham@wsbt.com)

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Gas prices are on the way down across the area. (WSBT photo)

Gas prices are on the way down across the area. (WSBT photo)

By WSBT News1

Story Created: Nov 9, 2008 at 5:09 PM EST

Story Updated: Nov 12, 2008 at 11:41 PM EST

SOUTH BEND — Gas prices are on the way down again. Our pump patrol found $1.90 a gallon at some stations in South Bend Sunday night. But some experts say gas is costing us all less as the economy gets worse.

Lower gas prices mean spirits are up. People at local gas stations Sunday afternoon said filling up is now a lot easier on their pocketbooks.

And by the looks of the crowded pumps, it might seem like falling gas prices are a good thing. But experts say it's only the silver lining on a very dark economic cloud.

"Prices are only going to stay low as long as the economy is crummy," said Notre Dame Economics Professor Tom Gresik.

As soon as the economy begins to strengthen, Gresik said prices will go back up.

St. Mary's College Economics Professor Jerry McElroy told WSBT the recession will likely last at least until the middle of 2009.

"Therefore we could expect the demand for gasoline and oil to be down," he said.

He also said we should start to see signs of economic improvement late next year. But McElroy also noted gas prices could drop even lower in the meantime.

"We could see gasoline back to $1.50 a gallon," he said. "But again, I think it will only be short-lived."

That, said Notre Dame Professor Tom Gresik, means prices will not go up anytime soon. If you're trying to set up holiday travel plans, both professors advise you should take the trip.

But Gresik said the time line for when the economy and gas prices begin climbing depends on what happens in the White House.

"There's different predictions and a lot of it all depends on what Barack Obama does when he takes over," Gresik continued.

Both Gresik and McElroy said falling gas prices had nothing to do with last week's election.

"I think practically nothing," laughed McElroy. "I think these are long term fundamental forces in the economy."

According to AAA on Sunday, the average price for a gallon of regular unleaded gasoline in the South Bend area is $2.08. This time last month it was $3.36. One year ago in South Bend, the average price for a gallon of gas was $3.15.

In southwest Michigan Sunday AAA reported the average cost of unleaded gas was $2.04 a gallon. One month ago it was $3.25. This time last year, a gallon of gas in southwest Michigan cost $3.13.

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