A few months ago, a barrel of crude oil was selling for $42, the cost of regular gasoline soared to more than $2 a gallon and consumers were told to pry open their wallets because expensive fuel was here to stay.
Today, oil is selling for nearly $49 a barrel, while the price at the pump is down to a more comfortable $1.88 a gallon.
The numbers seem to defy logic. But oil industry experts and economists say the disconnect between the price at the pump and the record price of crude is the result of quirks in the laws of supply and demand that are working their way through the distribution chain.
Despite worldwide jitters about a disruption in oil supplies, stocks of refined gasoline are higher than they have been in a year, which is one reason prices have stayed relatively low despite the speculative frenzy that is driving up crude oil futures.
But economists warn this might be a temporary reprieve from the growing threat of an energy crisis that some say is already creating a drag on economic growth worldwide.
While most say the current prices are irrationally high, global crude oil production is barely meeting demand, and the potential for supply disruptions remains real as a result of political instability in major oil-producing countries.
In other words, the high gas prices that consumers saw last spring are threatening to return, raising the possibility of rising inflation and slackening economic growth.
"Our sense is the market is legitimately concerned about higher energy prices broadly and, more importantly, very concerned how sustainably prices remain high," said Jack Caffrey, an equities strategist with JP Morgan Private Bank.
"More often than not lately, you see people talking about higher prices for longer."
Record high crude
Crude oil for September delivery reached $48.90 on the New York Mercantile Exchange yesterday, the highest since oil futures began trading in New York in 1983.
Although prices have reached record highs as measured in 2004 dollars, they fall short of prices in 1990 leading up to the Persian Gulf war, when prices soared to the equivalent of $57 per barrel in current dollars.
The price of crude oil, which accounts for nearly half of the retail price of gasoline, typically influences consumers' costs at the pumps. A $1-per-barrel increase or decrease in crude usually equates to 2.38 cents, up or down, per gallon of gas.
