CONSUMER ALERT: Watch Out For Falling Gasoline Prices - Spokane, North Idaho News & Weather KHQ.com

CONSUMER ALERT: Watch Out For Falling Gasoline Prices

MSNBC.COM - The failure of oil-producing nations to agree this week on boosting output sparked worries that the price of crude and gasoline could be headed higher again.

But a number of oil industry watchers think those worries are misplaced.

"Right now the real story is not so much what's happening in Vienna," where OPEC leaders met, said Nansen Saleri, CEO of oil reserve adviser Quantum Reservoir Impact. "The real story is what's happening in Libya and what's happening in the global economy, particularly in the U.S."

For U.S. drivers, the real story is that pump prices are falling for several reasons.

First, demand has fallen. At $4 a gallon, drivers have figured out how to cut back — either by driving less or switching to more fuel-efficient cars and trucks. Despite fears of possible tight supplies of crude, there are ample inventories of gasoline to last through the summer driving season. Prices are already retreating from the $4 mark.

Falling oil prices get much of the credit. Crude prices had already begun falling well before this week's public display of disaffection among the world's biggest producers.

Since peaking at around $127 a barrel in April, oil prices have backed down by about $15 even after this week's modest increase.

Much of the spring price surge followed the outbreak of revolution across the Arab world including the loss of production from embattled OPEC member Libya. But despite the loss of production, oil is still plentiful. In the U.S., oil stocks are well above their five-year average for this time of year.

The Libyan civil war also raised fears that unrest could spread to Saudi Arabia, disrupting output by the last producer with meaningful spare capacity. But as those fears have eased, so have oil prices.

"One can argue there are still risks everywhere else in the Middle East, including Saudi Arabia," said Saleri. "But they have a set of circumstances that make them far, far more stable and very different than the rest of the countries in the oil-producing region."

The Arab spring has clearly rattled OPEC. This week's meeting highlighted a major rift in the cartel, with Iran arguing against raising output and Saudi Arabia arguing for it. Though OPEC has long been plagued by internal squabbles, they are typically papered over with a formal statement of unity. So the public display of acrimony was unusual.

"This is one of the worst meetings we have ever had," Saudi oil minister Ali al-Naimi said after the meeting broke up not long after it started.

Oil prices may have shown little impact even if traders had gotten the production increase they expected. With many OPEC members already cheating on production quotas, OPEC's actual output is running about 1 million to 2 million barrels per day above the official target. Production hawks like Iran and Venezuela — who opposed calls from the Saudis for higher production — face ruinous revenue shortfalls if they hold back oil supplies. >>>CLICK HERE TO READ MORE FROM MSNBC

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