Oil prices have fallen to a three month low at just over $40 a barrel. That’s a 12% drop just in July. Associate Director of the Tulane Energy Institute, Eric Smith, says he expects prices to continue to go up and come back down. He says there is too much supply to help oil prices rebound completely, and companies keep drilling more.

“There are countries going offline in the Middle East, and that raises the prices. Then somebody increases production in the shale, and that drops the prices,” Smith said.

Smith says some companies jumped the gun and started drilling, expecting prices to rise, but the increase in supply pushed them back down. He says we’ve seen the number of oil rigs increase for the past three or four weeks in a row.

“Every time one of those rigs comes online that is a signal for some trader somewhere to sell oil because he thinks it’s going to be too much for him,” Smith said.

Excess gasoline inventories are even driving gas prices down, which is good news for consumers, but could be devastating to the companies. Smith says eventually oil prices will reach $60 a barrel, but there will be ups and downs along the way.

“The leading indicators are pointing in the right direction, but that still doesn’t say that you won’t see these swings in the oil price,” Smith said.