With such a high dependence on oil, the drop in gasoline prices over the past few months has come as a relief for some, but is just another sign of a weak economy.

Gas prices in Ames have recently dropped to under $2 a gallon.

David Swenson, associate scientist of economics-Agricultural and Life Sciences, said this drop in prices could have a positive impact on students.

“Anything that lowers your cost of going to school is a good deal,” Swenson said.

Although a drop in prices provides relief at the pumps, gas prices are only a small part of global economics.

“The standard determination of gas prices is the basics of economics, which is going to be supply and demand,” Swenson said.

Gasoline prices have been steadily declining, not only in Ames, but nationwide as well, as a result of the continuing recession, Swenson said. When a recession occurs, the demand for oil goes down.

“Falling purchases from U.S. consumers will thus weigh down oil demand,” according to the International Energy Agency Oil Market report for October 2008. “Oil product demand contracted by 3.7 percent as a result of weak gasoline demand.”

When the economy slows down, unemployment rises and people and businesses stop buying oil-based products. The unemployment rate in Iowa in the last year has risen by 12.3 percent, according to the U.S. Department of Labor.

Supply of the world’s oil comes from mainly one source, the Organization for Petroleum Exporting Countries. Together these countries control 78 percent of the world’s crude oil, according to www.opec.org.

Because the world’s oil comes from a few places, those producers have the ability to adjust the supply, Swenson said. When the demand decreases those producers still have to make money, therefore they keep producing oil when the demand goes down to cause prices to go down as well, Swenson said.

Prices for gasoline fluctuate on a short term level because people have anxiety about supply, Swenson said.

“Through the first part of this year there was the expectation that there was going to be a shortage in supply because the rest of the world’s economy was doing very well,” Swenson said.

He said this caused a spike in prices.

Now that the world’s economy is also slowing down, prices have come down, he said.

Swenson said he doesn’t think prices will go up anytime soon.

“As long as it’s confirmed we’re in recession, oil prices will find some level and hold,” Swenson said.