Higher gas prices could be sign of better times

Published 10:43 pm Thursday, January 22, 2009


Troy gas prices have increased 14 cents from this time last month. Gas can be purchased in Troy for $1.70, but last month gas prices were stationary at $1.56.

Even with the increase, prices are more than $1 less than a year ago and more than $2 less than six months ago.

Sign up for our daily email newsletter

Get the latest news sent to your inbox

Gas prices may be on the rise again, but it could be good news for the economy.

According to Clay Ingram, AAA Alabama public relations manager for the state of Alabama, the American dollar is re-gaining power.

“The American dollar is gaining some power. Crude oil is priced in dollars all over the world, so investors from other countries have to convert their currency into dollars in order to buy it,” said Ingram.

“When the value of the dollar is low, they can get a good exchange rate and they can buy the oil for cheaper. When the dollar gets stronger, the price of crude oil goes up a bit.”

Ingram says that there seems to be a general feeling that the economy is going to improve during 2009.

“The bottom line is that there are more American investors buying up crude oil and less foreign investors.” Ingram added,

“You have more people buying when the dollar is stronger and the price goes up in correlation.”

Fighting in the Middle East also has an affect on the price of crude oil.

“There is fighting that is going on in the Gaza strip area, and anytime there is a major Middle Eastern conflict, the commodities market gets a little anxious,” said Ingram. “Even though the conflict may not directly affect any of the countries that we import from, there is always the fear that it could escalate to the point that it reaches those countries.”

The conflict causes investors to buy the oil while it is cheaper, just in case the conflict begins to reach towards their countries.

“People start buying the oil up while it’s at a cheaper price, just in case something happens. Just the fact that they are buying it up causes our prices to go up,” Ingram said.

As far as whether or not gas prices will continue to rise, Ingram feels optimistic about the price of oil stabilizing.

“I don’t think we are going to see a whole lot of change till the end of February or the first part of March,” said Ingram.

“When the warmer weather comes in, people start getting out of the house a bit more. When the demand for oil goes up, our prices go up.”

There is no need to feel too anxious about this summer’s oil prices yet.

“I feel that it will be less of an increase this year than it was last year. Oil will be more reasonably priced for the warmer season,” Ingram added. According to calculations made by the AAA Alabama Web site, the state average of gas prices has gone up 18 cents per gallon since this time last month.