- Tom Silva
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Gas Prices Coming Back to Earth
After rising steadily for four months, gas prices at last seem to be stabilizing. Suddenly, pump prices have fallen six cents over two weeks to a national average of $3.88. Experts say gasoline could fall another nickel or more in the immediate future. Drivers might also get to say something they haven’t since October 2009 — they’re paying less for gas than they did last year.
“It’s nice, much more manageable,” said Mark Timko, who paid less than $4 per gallon recently in Burr Ridge, IL, a Chicago suburb, for the first time since March. “I wasn’t sure how high they were going to go this year.”
Gas prices are lower than they were a year ago in 11 states, according to the Oil Price Information Service. At $3.88, the national average is still costly, but it’s less than the peak of $3.94. Predictions of $5 gasoline have — thankfully evaporated.
Tom Kloza, publisher and chief oil analyst at Oil Price Information Service, believes that gas prices will drop to a national average of just above $3.80 soon. Stuart Hoffman, chief economist at PNC Financial Services Group, said declining prices will put more money into the economy that Americans can spend on other things. A 10-cent drop in gas prices means drivers have an extra $37 million per day.
Stabilizing crude-oil prices and “sufficient supplies” of gas have led to the price decline, Trilby Lundberg, president of Lundberg Survey, Inc., said. The drop was the first in Lundberg’s twice-monthly surveys since December. The costliest gas in the lower 48 states was in Chicago, where the average was $4.26 a gallon, Lundberg said. The cheapest price was in Tulsa, where customers paid an average of $3.52 a gallon. “We can thank crude oil for allowing gasoline to do what it has been wanting to do for weeks, which is drop,” Lundberg noted.
The price of gas is becoming an issue in the 2012 presidential election. President Barack Obama urged Congress to boost federal supervision of oil markets, including larger penalties for market manipulation and greater power for regulators to increase the amount of money traders must put up to back their energy bets. “We can’t afford a situation where some speculators can reap millions, while millions of American families get the short end of the stick,” Obama said. Mitt Romney, the likely Republican nominee, has accused the Obama administration of disrupting domestic oil production with regulations.
The Energy Information Administration weekly report noted that the nation’s crude oil stocks rose for the fourth straight week by 3.9 million barrels to 369.0 million barrels, better than anticipated. Gas stocks fell by 3.7 million barrels to 214.0 million barrels. Demand for gas saw a relatively small retraction of 103,000 barrels per day (bpd) to 8.681 million bpd. Demand in the same week in 2011 was 500,000 bpd higher. The four-week demand average for gas is still falling somewhat and currently stands at four percent. Gas demand of 8.775-million bpd represents a 94,000 bpd increase, but reflects a 288,000-bpd drop from the same week last year. The four-week moving average shows gas demand destruction of 2.8 percent; and the year-to-date numbers imply about 5.9 percent lower consumption. Analysts can split hairs about actual motor fuel demand, but it is clearly lower than last year,
“April has seen more days of gas price declines than any month this year, which has motorists and analysts alike wondering if a gas price break is under way,” said Martha M. Meade, Manager of Public and Government Affairs for AAA Mid-Atlantic. “While several factors influencing crude oil prices remain in play, some analysts believe gas prices will continue to retreat and sometime in the next ten days or so we could be paying less at the pump than we were a year ago.”
Americans may be mending their gas-guzzling ways, according to the Washington Post. According to Steven Mufson, “As prices have neared and in some cases topped $4 a gallon, drivers have cut their consumption of gasoline to its lowest levels in a decade, driving less and buying cars that are more fuel-efficient. The adjustment has slowed the climb in gasoline prices, which until last week had risen for 10 consecutive weeks, and could preserve some money for Americans to spend on other items as the economy struggles to recover more convincingly. In the Washington area, there has been an increase in applications for carpooling under the Commuter Connections program, which links people seeking to share rides. Applications rose 20 percent last year and 10 percent in January and February, in each case closely tracking the increase in gasoline prices, according to Ronald Kirby, director of the department of transportation planning for the Metropolitan Washington Council of Governments. The response to $4 gasoline is reinforcing a trend toward lower fuel consumption. This will be the third year in the past five with historically high oil prices. Even before the latest price spike, gasoline consumption had dropped six percent from 2007 through 2011, the Energy Information Association (EIA) said. The Federal Highway Administration adds that the number of vehicle miles driven over a 12-month period ending January was lower than in any year since 2004.”
Gasoline purchases totaled four percent of total consumer spending in 2011, noted Mark Zandi, chief economist of Moody’s Analytics. That’s more than the 2.3 percent recorded when crude oil prices crashed in 1998, and significantly less than the six percent level in 1981 when an oil price shock shook the economy. “I’ve been surprised, at least so far, that $4 a gallon hasn’t done more damage,” Zandi said. “So far, it doesn’t seem to have done any.” According to Zandi, the improving job market is one reason. Another is that the warm winter reduced people’s heating bills and evened out total household energy costs.