SAN FRANCISCO (KCBS/AP) -- Over the last few months, oils prices have continued to rise with no end in sight. But supply and demand appear to be prevailing as the price of oil closed Tuesday at below $120 a barrel.
“It wasn’t that long ago that people we’re saying that oil would go up to $200 a barrel with no stopping and what we’re finding is that the rules of economics play hold,” said Ken Winans, President of Winans International Management and Research. “When you have oil go up to a point, people stop using it as much of it, and so you have more supply than demand [and] price pulls back.”
Winans said that changes in driving and flying habits have caused the price of oil to dip which should result in lower gasoline prices. Winans also added that a strengthening dollar is also contributing to lower energy prices.
Lower oil prices sent stocks higher, and Winans said the Federal Reserve brought good news to Wall Street by leaving interest rates unchanged.
“One of the things that had driven the market south from its rally point of April to the lows of just two weeks ago was the fear that the Federal Reserve was going to have to raise federal interest rates to combat what was perceived to be an inflation problem.”
According to Winans, inflation, which is driven by energy prices, is not as bad as previously thought, and lower oil prices should also affect the price of commodities like corn. However, Winans warns that we're still in a soft economic patch and that there likely will still be bad news in employment and real estate markets.
On Tuesday, stock prices closed sharply higher on Wall Street. The Dow Jones industrial average rose nearly 332 points to 11,615.77. Gainers on the New York Stock Exchange outnumbered losers by a 3-to-1 margin. The Nasdaq Composite Index gained 64 points at 2,349.83, and the Standard-and-Poor's 500 Stock Index was up 36 points at 1,284.88. Trading volume on the New York Stock Exchange totaled 5.2 billion shares. Volume on the Nasdaq Market came to 2.3 billion shares.
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KCBS' Melissa Culross reports
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