Monday, August 28, 2006

Freezing in Bar Harbor

While vacationing in Bar Harbor, which is much colder this time of year than I expected, I noticed that gasoline prices have been falling. The lowest price I spotted here in Maine is $2.56 per gallon. But I see the price has been falling nationwide. This is probably due to rising inventories--perhaps caused by falling demand. My guess is that many people cut back on vacation plans this summer because they were anticipating much higher gasoline prices.

We may be in a vicious circle. First, demand strengthens. Then gas prices go up. Then high prices reduce demand, and prices fall. Then demand strengthens again, and so on and so on.

While I continue to believe oil and gasoline prices are unjustifiable high, I seriously doubt they will fall back to levels I would call cheap. As long as oil is above $60 per barrel, I will continue to worry about the economy's health.