Gas prices are falling -- sort of

The Lundberg Letter reports national gasoline prices have fallen 12 cents in two weeks, and AAA reports Hawaii prices have also begun to fall -- Honolulu self-serve regular below $4.40 a gallon, Wailuku below $4.70 -- though our island prices are not yet below the level of a month ago. Let's keep this in perspective, though. Gas averaged $3.18 a gallon in Honolulu a year ago Monday. A decline of a few pennies is a drop in the tank when prices are still more than $1.20 higher than they were last summer. So the real question is how much prices will fall. Will they fall enough to constitute a "Return to Before," in other words -- and the answer to that question is, no. Demand for oil is still surging worldwide, but not in the United States. The increase is in countries like China, where consumers bought 18% more cars last year, and India, and Indonesia. Did you know that fuel prices are subsidized in China, India and Mexico? I mean consumers pay less than the real price and the governments make up the difference. Their economies could collapse otherwise. In India, for example, people burn subsidized kerosene. If they couldn't afford it, they would burn wood, and it would be an ecological disaster. In China, the central government spent $40 billion on fuel subsidies last year. This year it will spend even more. In Indonesia, where diesel-guzzling boats pay the same low subsidized prices that scooter owners do on land, the mere announcement of price hikes set off demonstrations. British Petroleum, which does more market research than most oil companies, says countries with fuel subsidies account for 96% of all increased oil consumption. I told you earlier that the weak dollar and the weak stock market (driving some investment dollars to oil futures contracts, bidding their prices up) were contributing factors to high oil prices. Well, I think the decline we've seen in recent days has resulted from a slightly stronger dollar and a slightly stronger stock market. But this may already be over.