<img height="1" width="1" style="display:none" src="https://www.facebook.com/tr?id=192888919167017&amp;ev=PageView&amp;noscript=1">
Tuesday, March 19, 2024
March 19, 2024

Linkedin Pinterest

Gas price drop like a present to Americans

Big decrease allows consumers to spend dollars elsewhere

The Columbian
Published:

HOUSTON — Oil traders might see the 27 percent slide in global prices as a bear market. For U.S. consumers, it’s more like an early holiday gift.

The drop in crude has pulled retail gasoline down more than 50 cents a gallon from the year’s high in April. That means annual savings of $500 for the average U.S. household, which consumes about 1,000 gallons of fuel a year, according to data from the Federal Highway Administration and Energy Information Administration.

“That’s like somebody putting dollars right in your pocket,” David Hackett, the president of Stillwater Associates, an energy consultant in Irvine, Calif., said by phone Tuesday. “That sounds like Christmas presents, going out to dinner, being able to do something.”

Gasoline’s slide represents the biggest benefit that U.S. consumers have seen to date from a record boom in domestic oil production, a surge that’s contributing to a global crude glut and helping reduce international prices. U.S. gasoline is being exported at record levels for this time of year.

The average retail price fell 1.9 cents to $3.144 a gallon, Heathrow, Fla.-based motoring group AAA said on its website. That’s down from this year’s peak of $3.696 in April and the lowest since February 2011. Futures have decreased 86 cents on the New York Mercantile Exchange over the same period, signaling there may be further declines at the pump.

Gasoline is following the larger drop in the oil market. Brent crude, the global benchmark, closed at $84.47 a barrel Thursday on the London-based ICE Futures Europe exchange after slipping to $82.60, the lowest level since November 2010. U.S. benchmark West Texas Intermediate settled Thursday at $82.70 on the New York Mercantile Exchange, after trading below $80 for the first time since 2012.

Prices are falling with U.S. oil output at the highest level since 1985 and the Organization of Petroleum Exporting Countries producing the most in more than a year. At the same time, the Paris-based International Energy Agency lowered its estimate for global demand growth for this year and next in a report Tuesday.

Americans are spending about $230 million a day less on gasoline than they were on July 4, based on prices and consumption, said Michael Green, a Washington-based spokesman for AAA, the country’s biggest motoring group.

Most consumers are paying $5 to $15 less to fill their tanks than they were around the Fourth of July, according to Green. “This is free money that people can use for savings or other spending in time for holiday shopping,” he said by email Wednesday.

On top of sliding energy prices, food costs fell 0.7 percent in September, driven lower by eggs, baked goods and meat, IHS Inc., an Englewood, Colo.-based consultant, said in a research note Wednesday. Combined, the drops stand to improve the holiday season both under the Christmas tree and on the dinner table, said Michael Montgomery, a U.S. economist at IHS.

“The two most observed prices by consumers are food and energy and they play the largest role in forming consumer opinions about inflation, providing a little more room for luxuries rather than facing a squeeze from necessities,” he said in the report.

Retail sales over this holiday season, from November through December, are expected to be up 4.2 percent from last year, according to IHS. That excludes motor vehicles, gasoline and food purchases.

“This holiday season — with just about six weeks until Black Friday — is expected to glitter in comparison to the last two years,” Chris G. Christopher Jr., director of IHS’s U.S. consumer economics group, said in a report Wednesday. “The recent news on the consumer front has been relatively favorable, especially as pump prices are falling.”

Black Friday, the day after the U.S. Thanksgiving holiday, marks the start of the holiday shopping season. It falls on Nov. 28 this year.

“Reconciling consumer confidence with consumer spending continues to be a challenge,” said Jack Kleinhenz, the chief economist at the National Retail Federation in Washington, who described last month’s retail sales as “surprisingly weak.”

Loading...