Oil prices rose in electronic trading after a coalition of powers launched air strikes against forces loyal to Libyan leader Moammar Gadhafi this weekend. West Texas and Brent crude prices had previously fallen about 5% amid hopes for a resolution of the political struggles in Libya and the Gulf region, and following the earthquake in Japan. That fall-off was reflected in slightly lower gas prices.
The cost of regular gas nationwide Sunday was $3.548, down from $3.557 the previous week, according to
the AAA. However, those numbers were still way up from $2.818 a year ago.
Gas at $3.50 a gallon may still be too high for many Americans to afford. Some economists believe that the recent recession was deepened by the price spike in mid-2009. While gas is well short of the $4 reached then, real wages have risen very little and 9% of American are unemployed. Household budgets may need to be rebalanced to accommodate larger gas expenditures, if this hasn't happened already. This means that even with the extension of tax cuts, consumer spending may be hurt.
Companies that use large amounts of gas -- ranging from airlines to fast food companies to retailers -- still face mounting pressure. Many have begun to raise prices but consumers may not be willing to accept these.
Meanwhile, demand for crude in the developing world, particularly China, has not abated. OPEC has signaled it has no intention of raising production although some of its members, including Saudi Arabia, the world's largest producer, have begun to increase exports.
Gas prices have plateaued, but that may not be the case for long.