Crude Oil Prices Start To Drop: Could Gas Prices Be Next?

Good news has been hard to come by at the pump lately, but there is something to be optimistic about Monday.

Crude oil prices, which make up 70 percent of the cost of gas, have begun falling as tensions with Iran start to ease.

Iran met with representatives from the U.S. and several other countries over the weekend regarding a nuclear program, and the talks reportedly went well. A second round of discussions have been scheduled for next month.

Prior to the weekend's developments, there were fears that the national average could creep over $4 a gallon if talks with Iran went poorly.

Gas prices are still very high--averaging $3.90 a gallon last week--but analysts predict prices should stabilize as we head into summer. Crude oil prices dropped to $102 a barrel Monday; they had been $110 last month.

Low crude oil prices are critical to low gas prices. Crude oil rose $28 between October 2011 and April, and with it, so spiked prices at the pump. The U.S. Energy Information Administration says that skyrocketing worldwide demand pushed crude oil prices to record highs in 2008, leading to the highest prices ever seen in the United States. When the economy collapsed around the world and demand fell, crude oil prices dropped dramatically, allowing prices at the pump to briefly dip under $2 in late 2008 to early 2009.

Ironically, improvement at the economy proved bad news for wallets everywhere, as it brought demand for gas back up--and with it, increasingly higher prices.

Political unrest in the Middle East can also contribute to high crude oil prices, hence one of many reasons why positive developments with Iran are so critical.

More information on factors affecting gas prices can be found Chere.