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Gas prices ready to drop like a thick brick

In the last month there has been a stunning rash of refinery closures and fires - any one of which should have sent gas prices upward - but with a flagging economy, a grim demand picture, and a glut of surplus, gas prices are destined to decline.

"They're going to drop like a thick brick" says Charles Langley ... 

This morning, UCAN's Gas Project is reporting an average price of $3.026 a gallon for regular unleaded in San Diego, down 2.5¢ since Friday, and down 15 cents in the last month. We expect prices to drop below $3 a gallon on our index in the next 48 hours. AAA, the Auto Club is alreaady reporting an average price of $2.992 a gallon.

"Three dollars a gallon is an important psychological price point for dealers and consumers," says Charles langley, Manager of UCAN's gas project, which has tracked hundreds of gas station prices in San Diego for the last 11 years. i "We have been conditioned to think that $3 a gallon is somehow cheap."

Analyst Bob van der Valk says gas and oil prices will likely repeat last year's dramatic decline to $40 a barrel - or less - saying "it's going to be deja vu all over again," because the fundamentals don't change.

"Oil and gasoline markets are being grotesquely manipulated," says Langley, but "sooner or later the basic fundamentals will eventually prevail - at least through the fall and Christmas."

In 2008, high oil and fuel prices drove five airlines into bankruptcy, harmed retail sales, and destroyed profit margins at Ford, Chrysler, and GM.

High oil prices, gamed to $147 a barrel by unrealistic predictions from Goldman Sachs,  contributed to last year's massive market meltdown. This in concert with near-record high unemployment levels in the last 40 years has significantly reduced demand. Consumers are buying fewer luxury items, durable goods, and even groceries as they conserve cash. This means that goods are no longer being shipped, and high unemployment translates into lower fuel demand from commuters. 

"If gas prices don't drop below $2.50 a gallon soon, something is seriously wrong," says Langley. "It means the law of supply and demand is being broken, and the market is being gamed."  

For more information or background contact UCAN at (619) 696-6966.