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Gas prices dropping, inflation still a concern

By Seth Acuff
[email protected]
Staff Writer

Dr. John Reiners Associate professor of business and economics Dr. John Reiners has been following closely the rising and falling costs of post hurricane energy in the United States.

Gas prices immediately following Hurricanes Katrina and Rita skyrocketed to over three dollars per gallon spurring on inflation. As the Gulf Coast returns to full production capacity fuel prices are dropping, and as Reiners observes, so is inflation.

Though gas prices may seem to be lowering relative to their spike after the hurricanes, they are certain to continue to rise over the long run.

According to Reiners, the world�s supply of gasoline is relatively fixed, but demand continues to increase. The United States, China and India are all markets that demand increasing amounts of fossil fuel products.

Gas prices are now lower than before Hurricane Katrina hit. Reiners explains that most European countries and Japan heavily tax gasoline both as a source of revenue and to discourage excess use.

He said,�I strongly believe the US must follow suit or face a very difficult energy crisis in the next five to 25 years.�

The recent high fuel costs have been detrimental to consumers and U.S. auto makers.

According to Reiners, consumer preferences have changed and Americans no longer desire large fuel inefficient SUVs. As a result, GM and Ford both posted big losses in the most recent quarter. �They are huge companies, and their pain would be felt throughout the U.S. economy,� he said.

Solutions for the problem of energy costs are numerous, but few are practical.

President Bush suggests that Americans conserve fuel by driving less, but as Reiners said, �Most Americans depend on their cars for everything: shopping errands, doctors� appointments and recreation� and therefore it is unlikely that American demand for transportation will decrease.