Post by VAisforRacers on Nov 13, 2013 11:24:01 GMT -5
U.S. gasoline prices have fallen to their lowest level in nearly 33 months amid a boom in domestic oil drilling, leaving consumers with some extra disposable income just in time for the holiday-shopping season.
Tuesday's national average price of $3.18 a gallon—26 cents below a year ago—was the lowest since Feb. 22, 2011, when it was $3.17, according to AAA, which tracks daily gas prices. The automobile club predicted that the national average could fall close to $3 a gallon by year's end because of abundant supplies, declining seasonal demand and lower crude-oil prices.
The respite at the pump was welcomed by Heidi Pickerell, president and chief executive of Meals on Wheels of Shawnee and Jefferson Counties Inc. in Kansas, who said the prices made it easier to find volunteers to deliver for the nonprofit group.
"It certainly does help out with the budget, particularly now as we are nearing the holiday season," she said. "It's a noticeable reduction that we're experiencing."
The price decline is being driven by refiners, which are producing more gasoline than U.S. drivers need, particularly in the nation's midsection. The extra fuel ends up in storage tanks around the country. Domestic gasoline inventories were at 210 million barrels in the first week of November, up nearly eight million barrels from a year earlier, according to the Energy Information Administration.
Normally, refiners would cut back when inventories are high. But they are earning fat profits from converting petroleum—plentiful in the Midwest thanks to the boom in shale-oil production—into diesel for export to Europe and Latin America.
Gasoline is produced in the same process but it isn't as widely used abroad, leaving the U.S. market awash in the fuel. Gasoline futures have fallen by 16% since late August, ending down 0.4% on Tuesday at $2.5864 a gallon.
"Refiners are still making money on diesel, but gasoline is almost a byproduct," said Sarah Emerson, managing director of consulting firm ESAI Energy.
To be sure, prices could rebound if demand picks up. That may already be happening, at least in the short term. Gasoline consumption rose to 9.29 million barrels a day last week, up 12% from the same time last year, according to the EIA.
But with refiners still churning out massive quantities of gasoline, it would take weeks of strong demand to eat into the surplus, analysts say.
Drivers in six states were paying an average of less than $3 Tuesday, including Texas, Louisiana and Missouri, the state with the cheapest gasoline, just $2.81. Drivers in 11 other states were enjoying prices of $3.10 or less, including Iowa, Indiana, Minnesota and Ohio.
The national average hasn't fallen below $3 a gallon since December of 2010.
Consumer spending has been lackluster despite an improving jobs picture and a stock market at record highs. Personal expenditures grew 1.5% in the third quarter, well below the 2.3% pace of the first three months of the year and the slowest since 2011, Commerce Department data show. Such figures prompted Morgan Stanley last week to say it expected the 2013 holiday-shopping season to be the weakest since 2008.
But falling gas prices could boost consumer sentiment and overall spending, because prices at the pump have an outsize psychological importance for shoppers, economists say.
"This should be a positive for the consumer," though gas prices are just one factor affecting shoppers, said Daniel Silver, an economist at J.P. Morgan Chase.
Whether the economy gets a noticeable lift depends on whether the drop in gasoline prices is sustained over time. Prices tend to be lower in winter, and the drop this fall echoes similar ones in 2012 and 2011—declines that were later reversed, said James Hamilton, an economics professor at the University of California, San Diego.
The lower prices were noticed by Scott Herbert, who said the $65.82 he spent to fill the tank of his Nissan Pathfinder in Dallas Tuesday was roughly $10 less than he had spent earlier this year.
"It means I can order in or eat out a little more often with my wife," said Mr. Herbert, a 45-year-old music producer. "And there will be more in the budget for holiday gifts."
Tuesday's national average price of $3.18 a gallon—26 cents below a year ago—was the lowest since Feb. 22, 2011, when it was $3.17, according to AAA, which tracks daily gas prices. The automobile club predicted that the national average could fall close to $3 a gallon by year's end because of abundant supplies, declining seasonal demand and lower crude-oil prices.
The respite at the pump was welcomed by Heidi Pickerell, president and chief executive of Meals on Wheels of Shawnee and Jefferson Counties Inc. in Kansas, who said the prices made it easier to find volunteers to deliver for the nonprofit group.
"It certainly does help out with the budget, particularly now as we are nearing the holiday season," she said. "It's a noticeable reduction that we're experiencing."
The price decline is being driven by refiners, which are producing more gasoline than U.S. drivers need, particularly in the nation's midsection. The extra fuel ends up in storage tanks around the country. Domestic gasoline inventories were at 210 million barrels in the first week of November, up nearly eight million barrels from a year earlier, according to the Energy Information Administration.
Normally, refiners would cut back when inventories are high. But they are earning fat profits from converting petroleum—plentiful in the Midwest thanks to the boom in shale-oil production—into diesel for export to Europe and Latin America.
Gasoline is produced in the same process but it isn't as widely used abroad, leaving the U.S. market awash in the fuel. Gasoline futures have fallen by 16% since late August, ending down 0.4% on Tuesday at $2.5864 a gallon.
"Refiners are still making money on diesel, but gasoline is almost a byproduct," said Sarah Emerson, managing director of consulting firm ESAI Energy.
To be sure, prices could rebound if demand picks up. That may already be happening, at least in the short term. Gasoline consumption rose to 9.29 million barrels a day last week, up 12% from the same time last year, according to the EIA.
But with refiners still churning out massive quantities of gasoline, it would take weeks of strong demand to eat into the surplus, analysts say.
Drivers in six states were paying an average of less than $3 Tuesday, including Texas, Louisiana and Missouri, the state with the cheapest gasoline, just $2.81. Drivers in 11 other states were enjoying prices of $3.10 or less, including Iowa, Indiana, Minnesota and Ohio.
The national average hasn't fallen below $3 a gallon since December of 2010.
Consumer spending has been lackluster despite an improving jobs picture and a stock market at record highs. Personal expenditures grew 1.5% in the third quarter, well below the 2.3% pace of the first three months of the year and the slowest since 2011, Commerce Department data show. Such figures prompted Morgan Stanley last week to say it expected the 2013 holiday-shopping season to be the weakest since 2008.
But falling gas prices could boost consumer sentiment and overall spending, because prices at the pump have an outsize psychological importance for shoppers, economists say.
"This should be a positive for the consumer," though gas prices are just one factor affecting shoppers, said Daniel Silver, an economist at J.P. Morgan Chase.
Whether the economy gets a noticeable lift depends on whether the drop in gasoline prices is sustained over time. Prices tend to be lower in winter, and the drop this fall echoes similar ones in 2012 and 2011—declines that were later reversed, said James Hamilton, an economics professor at the University of California, San Diego.
The lower prices were noticed by Scott Herbert, who said the $65.82 he spent to fill the tank of his Nissan Pathfinder in Dallas Tuesday was roughly $10 less than he had spent earlier this year.
"It means I can order in or eat out a little more often with my wife," said Mr. Herbert, a 45-year-old music producer. "And there will be more in the budget for holiday gifts."