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Good news: cheaper gasoline on the way

With almost everything collapsing today it's probably time to highlight some good news: the big drop in oil prices in recent days means we could see gasoline prices at the pump fall by about 15% in coming weeks.

The top chart compares the price of crude oil futures (white line) with gasoline futures (orange line). Gasoline futures appear to be lagging crude futures, which suggests that gasoline futures have further to fall, perhaps to $2.40/gal.

The second chart compares gasoline prices at the pump (white line, which comes courtesy of AAA) with gasoline futures prices (orange line). Based on past correlations, today's $86.6/barrel of crude oil should, if it holds, result in gasoline prices at the pump falling from $3.70/gal to $3.10.

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