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Why are gas prices dropping after rapidly rising last week?

About a week after rapidly rising, oil prices are now falling, affecting gas prices.

JACKSONVILLE, Fla. — You may have noticed a little less pain at the pump if you've filled up your car in the last few days.

Oil prices are falling this week after rapidly rising a little more than a week ago.

 According to Abdel Missa, professor of finance at Jacksonville University, the drop is most likely because of news of peace talks between Russia and Ukraine. 

Missa believes we'll continue to see prices fall. He said in order for them to rise again, a significant escalation in the war has to happen. 

"Remember, the markets, they don’t need to see … just having those talks and just having the probability that we might see an end, the market takes it into account, so the markets are forward looking," Missa said.

"The markets don’t react just by saying, 'ok, now we have a resolution so the prices are going to drop from 130 to 80.' At the probability of talks, the probability of ceasefires, the markets adjust quickly,” Missa said.

Missa said he thinks the prices of other goods that we've seen rise during the war between Russia and Ukraine, like wheat, will drop too.

“A lot of the commodities that are being produced there we’re seeing a very similar action to what’s going on in the oil market," he said.

One of the lowest prices at the pump that we've seen is at the Circle K on Beach Boulevard and Southside in Jacksonville with regular gas at $3.99.

The Federal Reserve Wednesday tried to alleviate the high prices of goods overall thanks to inflation. It raised interest rates by a quarter of a percentage point for the first time since 2018. It's one of seven hikes planned for this year to fight 40-year high inflation numbers.

"When there’s inflation, you want to cool down the economy a little bit and so, you raise interest rates so that way you lower demand a little bit," Missa said.

According to Missa, the Federal Reserve can't control the factors that are affecting the supply, like COVID and the war between Russia and Ukraine. He said it's a balancing act between raising interest rates to fight inflation, but not raising them too high that it causes a recession.

“The fed cannot overreact and raise interest rates very quickly because inflation is too high right now, so you have to think longer term as well, because if you go and you just raise interest rates very high too quickly, you’re causing a recession and then you’re going to have an impact," he said.

"So, their job is really, really difficult because you have to kind of forecast ... is it more longer term or is it shorter, so we can’t overreact," Missa said.

Missa said you'll see the biggest impact on mortgage rates when it comes to rising interest rates. He said you won't see results when it comes to inflation for a few months. 

The Federal Reserve Chair said Wednesday he's determined to restore price stability, and said the economy is well positioned to handle the hike.

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