A local radio talk show host in San Diego stated that he use to work in the oil industry and according to him the oil company profits are low until the cost of a barrel of oil goes up like it has over the last two years. Then these excessive profits are plowed back into the search for more oil.

Supply and demand are one factor in determining the cost of gas but I think traders and speculators are just as much a factor. About a month ago I bought 91 octane for $3.39 a gal. Three weeks later it was down to $3.07 and has stayed the same over the last week. This is while oil has been bouncing between $92 and $98 a barrel. The most I ever paid was, I think, $3.69 when the cost of a barrel of oil was in the $80 range.

Last year California drivers cut back oil consumption by 1%, the first time this has ever happened. With further cutbacks, and reduced world wide demand due to recession, we'll see gas prices drop. They may not ever fall back to $1.49 but $2.29 is certainly possible.