High Crude Oil Prices Fall for First Time in Recent Months

July 17, 2008

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(Long Island, N.Y.) On July 16th, for the first time in recent months the price of a barrel of crude oil went down more than $10 which gives some hope that the price may drop further as either demand continues dropping, or if by some chance, supply increases.

The effects of high crude oil prices are insidiously working their way through the Long Island economy. Because oil is at the core of almost everything we do, any dramatic price shifts are almost immediately reflected in major product segments. From airline tickets to tires, from the price of a grape fruit to a three pound can of coffee. Even the price of electricity is impacted by higher petroleum prices.

While companies, governments and individuals all share in the pain of higher oil prices, ultimately it is the individual who pays for it all. Companies are owned by individual investors, government is funded by individual taxpayers and it is the individual consumer who buys the products and services marketed by companies. So, in the end, high oil prices impacts everything for the consumer.

How does the average Joe react to the price of gasoline increasing 25-percent per gallon in less than six months? The answer depends on whether the increases are sustained over a long period of time, or if it is a short-term spike as in the case of a Middle East flare that is over and forgotten in less than two weeks.

Unfortunately, our current round of ever-higher crude oil prices seems to be a sustained, long term trend. The available evidence suggests that we need to adapt to the higher prices. Individually we are going to have to make many changes in our appliances, transportation and housing to cut costs while maintaining the standard of living we want.

Technology will in many cases help us cut our energy consumption through new efficient designs. “It is unlikely that there is any one big thing that will be the total answer to our energy needs; more likely it is going to be a collection of small savings here and there that add up to big savings for the individual.” said Brian Keegan, owner of Long Island Auto Find, a local automotive dealer which has seen significant changes in the buying and selling paterns of his Long Island customers. “Oil prices are really hitting consumers in the pocket, and we are seeing it in our dealerships vehicle sales.” he said.

Individual conservation is important and a part of the solution to this complex problem, but public policy is also an equally important factor. Part of the reason we have this problem is because we need to increase domestic supply and distribution. This week there is good news on that front as well with President Bush lifting the executive order banning off shore oil exploration and production. He also called on Congress to do away the similar legislative bans. We can only hope that Congress is listening.