Gasoline prices topped $5 a gallon in June, which was a record. Based on low supply, due in part to the Russian invitation of Ukraine, there was speculation that the price would head toward $6. Instead, the price has plunged to $3.78 today and continues to dive rapidly. Experts at GasBuddy believe that gas prices will drop below $3 in some parts of the country.

Americans forget that gas prices were below $2 per gallon in 2004 and less than $1 in 1989. Gas prices had a long run between then when they averaged about $1.50. It is possible that the factors that contributed to these prices could happen again.

To start, the price of a barrel of oil dropped by $14 in 1989. Today, the number is about $90. There was a price war among some of the members of the Organization of the Petroleum Exporting Countries in the last of the ’80s. Prices fell as OPEC members fought for market share.

While the Russians have cut off oil to Europe, it has exported huge amounts to China and India. That gives these mammoth oil consumers ample supply, which generally brings down prices.

The U.S. Energy Information Administration expected an increase in oil production next year. American oil producers Exxon and Chevron have said they will push up production in the huge Permian Basin in west Texas. The supply of crude in this area is not infinite, but it is one of the largest deposits in the world.

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Despite tremendous political friction between the United States and Europe on the one side and Venezuela on the other, the South American country has the largest oil reserves of any nation in the world. It has an aged infrastructure that would need to be repaired. Chevron, seeing huge profits producing there, recently asked the U.S. Treasury to expand its Venezuelan licenses.

Finally, the world is in the midst of an economic downturn. This already has blunted energy use in the United States. It has done the same in China, the world’s largest consumer. This could take the price per barrel under $20, where it traded just over two years ago.

For gas prices to return to $1, it would require a perfect storm of factors. Today, that storm has become possible.

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