on the rise. hardest hit are california and hawaii where aaa is reporting the average price is well above $4.00 a gallon. nationally the average price jumped 30 cents in just the past month. who is to blame and what can be done to curb these out-of-control prices? joining me is lacey black key, chief economist for edmunds.com. good day.
we've heard all the usual suspects out there, the speculators, the demand, the geopolitical risk. what do you think is really causing the
to go up?
i think at the moment it's fear. people are worried there will be some sort of major supply disruption during to the closure of the straight of for hues. all of a sudden there won't be enough supply and prices will go skyrocketing at the pumps. there may be additional demand driving it as the
is slowly recovering. what we've seen is that consumers have been cutting back on
in the last month. purchases are down about 6 prs from that period. what we're seeing is a lot of fear because supply hasn't been cut yet. gasoline inventories are at their highest in ten years.
lacey, are we slow to respond to lower demand? you study in economics courses that
supply and demand
have a direct correlation with one another. so people are not asking for as much
. should those prices just come down?
that would be the theory. but there are lags in the
in which case this happens. and at the moment there really is a lot of fear in the marketplace, the worry that supply will be cut and this is what's driving prices up.
i'm sure you heard about
-- go ahead.
i was going to say when the fear abates, that will drive prices down and stabilize them.
i was mentioning
who yesterday said he wants to be and would be the $2.50 a gallon president. and that
is the $10 a gallon president. what can the
do to actually bring down the high
that's a good question. in the short run, you can't really change the course of the economy that you inherit, much as every president and candidate would like to have us believe that. there are things the government can do. if there is a supply disruption, the government has millions of
barrels of oil
strategic petroleum reserve
. they can release some of this oil to help ease the supply situation and put downward pressure on prices. they have done this in the past when we've had issues with supply. for instance, after
so lacey, does it ever feel to you that the prices go up so quickly and it takes
forever and a day
, it feels like, to bring them back down?
it certainly does have that sensation. i think part of that is we're watching when they go up quickly. that becomes major news very quickly and consumers are going to the pump and seeing the prices go up. consumers are aware -- i think there's less media attention when prices start going down. consumers are aware of that. we see that in the behavior by somers in terms of car buying. once prices stabilize at the pump or they start falling, we see the consumer interest in compact and more
cars immediate starts to ebb.