Gas Prices Won't Stay Down Forever

The U.S. alone is spending hundreds of billions of dollars to repair its battered financial system, and President-elect Barack Obama and the new Congress have pledged support for other consumer-focused stimulus plans. At the other end of the spectrum, China has devoted $586 billion to its own economic-development projects.

In light of such efforts, the question in terms of energy prices may soon be not whether things will turn around, but how long it will take, and how to tackle inflationary issues at the other end.

"President Obama, when he runs for re-election, will be dealing with one of two things," says John Kingston, director of oil at Platts. "Either the economy will have recovered, and we'll be dealing with high oil prices again, or it won't have recovered yet, and we'll have low prices, but he'll still be dealing with that."

On the bright side for consumers, there's a good chance that prices will stay down for a while, and be less volatile on the way up, according to Phil Flynn, vice president and senior market analyst for Alaron Trading. Still, as consumers have proven over the past year, prices may ultimately be in their hands. After all, despite geopolitical tensions, production cuts, speculative investors and hurricane season, all it took was a little less driving and a little more conservation to create a 45% slide in prices at the pump.

"The lesson of what happened over the last 12 months is that this thing is not a linear, one-sided extrapolation," says Dr. Nansen G. Saleri, president and CEO of Houston-based Quantum Reservoir Impact, and former head of reservoir management at Saudi Aramco. "When prices are going up, people think they will go up forever and when they go down, people think they will stay down at a very low number."

"This is not so," he continues. "Consumers are very adaptive."