Why Has the Price of Oil Decreased So Significantly?

Question/Comment: Why has the price of gas decreased so significantly? This seems way more than an incremental adjustment to supply and demand. Is there something non-linear going on?

Paul Solman: Brace yourself for a very long answer.

The price of gas reflects the price of oil. Roughly speaking, since there are 42 gallons in every barrel of oil, a $1 change per barrel will eventually mean a roughly 2.5 percent change in the price of gas at the pump.


I started responding to oil price questions here on the Business Desk when oil was something like $140 a barrel. Now, with oil at $35, and gas down accordingly, I’d like to dilate on the issue.

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