Bet on it: Gas prices headed up

Crude oil and gasoline prices have taken us on a wild and crazy ride over the past two years. Crude oil prices rose from $51 a barrel in January 2007 to $145 in July 2008, a jump of 184 percent. Then prices plunged to $30 a barrel in December 2008, just five months later.

Gasoline prices have followed suit. They too rose rapidly between January 2007 and July 2008, from $2.21 a gallon to a high of $4.17, a rise of 89 percent. Then they headed straight down, hitting a low of $1.67 in December 2008.

How can we explain this crazy roller-coaster ride?

Oil prices soared in 2007-08 because massive increases in demand bumped up against an unchanged supply, according to James Hamilton, an economist at the University of California, San Diego.

Bangor Daily News