Dropping oil prices could help confidence rise
NEW YORK — A threat that's been hanging over the economy is starting to look a lot less menacing.
Oil and gasoline prices are sinking, giving relief to businesses and consumers who a few weeks ago seemed about to face the highest fuel prices ever.
President Obama's re-election prospects could benefit, especially if prices keep falling as analysts expect. A majority of Americans disapproved of Obama's handling of gas prices in an AP-GfK poll early this month. But that was before the full effect of the recent drop had reached drivers.
The average retail gasoline price has dropped 21 cents a gallon to $3.73 since hitting a 2012 peak of $3.94 on April 6.
The economy could gain, too. Consumers who spend less on fuel have more to spend on other purchases, from autos and furniture to appliances and vacations, that could help drive economic output and job growth.
The price drop will likely boost consumer confidence. It occurs at a timely moment: before the Memorial Day weekend, a busy one for travel and entertainment spending.
"It's extra money in the wallets of most American consumers, and that's going to help," said James Hamilton, an economist at the University of California, San Diego who studies oil prices.
Lower oil prices mean cheaper diesel and jet fuel for shippers and airlines.
Crude oil, which is used to make gasoline, is at a seven-month low of $92.81 a barrel. It's down nearly 13 percent since May 1. Behind the steady drop are larger fuel stockpiles, easing fears about Iran and expectations of lower demand as the global economy slows.
The average national gasoline price is expected to fall as low as $3.50 a gallon this summer. It could even dip near $3 in some states. The national average is being propped up by refinery problems in California that have lifted prices well above the national average there, according to Tom Kloza, chief oil analyst at the Oil Price Information Service.
A 50-cent drop in the gasoline price would save consumers about $70 billion over a year.
Earlier this year, oil and gasoline prices were jumping from high levels. Global demand was rising. And production outages were reducing supplies. Tensions between Iran and the West over Iran's nuclear ambitions raised fears that output from the world's third-biggest exporter would plunge.
Gasoline prices appeared on track to soar past $4 a gallon nationwide. Confidence among consumers, suffering from high unemployment and scant wage growth, would have likely worsened.
"People were prepared emotionally for $4.50 or $5 gasoline, so there's a sense of relief," Kloza said.
No one is yet overflowing with glee over prices. So far this year, gasoline has averaged $3.67 a gallon nationwide. If sustained all year, that would be the highest annual average.
John Heimlich, chief economist at Airlines for America, a trade group, is among those who aren't ready to cheer. Jet fuel prices dipped below $3 per gallon for the first time in months Tuesday, he said.
"I need more than one day below $3," Heimlich said. "I need weeks and weeks and weeks."
John Tillman, who runs Certified Carpet Care in Wesley Chapel, Fla., spends $4,000 a month on fuel for his vans that crisscross the state, visiting restaurants and other clients. He said gasoline prices are still way too high, and he thinks the government should do more to protect small businesses from high fuel prices. But he'll take any drop he can get.
"It's helped some," he said.
Show commenting policy
TribLive commenting policy
You are solely responsible for your comments and by using TribLive.com you agree to our Terms of Service.
We moderate comments. Our goal is to provide substantive commentary for a general readership. By screening submissions, we provide a space where readers can share intelligent and informed commentary that enhances the quality of our news and information.
While most comments will be posted if they are on-topic and not abusive, moderating decisions are subjective. We will make them as carefully and consistently as we can. Because of the volume of reader comments, we cannot review individual moderation decisions with readers.
We value thoughtful comments representing a range of views that make their point quickly and politely. We make an effort to protect discussions from repeated comments either by the same reader or different readers.
We follow the same standards for taste as the daily newspaper. A few things we won't tolerate: personal attacks, obscenity, vulgarity, profanity (including expletives and letters followed by dashes), commercial promotion, impersonations, incoherence, proselytizing and SHOUTING. Don't include URLs to Web sites.
We do not edit comments. They are either approved or deleted. We reserve the right to edit a comment that is quoted or excerpted in an article. In this case, we may fix spelling and punctuation.
We welcome strong opinions and criticism of our work, but we don't want comments to become bogged down with discussions of our policies and we will moderate accordingly.
We appreciate it when readers and people quoted in articles or blog posts point out errors of fact or emphasis and will investigate all assertions. But these suggestions should be sent via e-mail. To avoid distracting other readers, we won't publish comments that suggest a correction. Instead, corrections will be made in a blog post or in an article.
- Penguins notebook: Crosby understands NHL’s reasoning for ban
- Letang produces 5 assists in return as Penguins defeat Jets, 5-3
- Pirates trade Snider to Orioles for minor league pitcher
- Wilkinsburg man killed in his apartment
- Chartiers Valley displays shooting touch in blowout win over USC
- Pittsburgh to consider measure to give city employees 6 weeks of paid parental leave
- Winfield man is one of a few to attend all 49 Super Bowl games
- No cross-checking here: Penguins misspell ‘Sidney’
- Now a Patriot, RB Blount’s thrilled to have moved on from Steelers
- Panthers drop heartbreaker in overtime to Virginia Tech
- 3-D images to help police in Western Pa. navigate terror, hostage scenes