NEW YORK, N.Y. – After dropping for most of the month, gasoline is now cheaper in much of the U.S. than it was a year ago.
That hasn’t happened in more than two years, and it could be part of a larger decline in gasoline prices that could lift consumer confidence ahead of the summer driving season.
“Gasoline prices are right in your face,” said Fred Rozell, retail pricing director at the Oil Price Information Service. “It’s something you have to spend money on every week. If prices continue to decline, people will feel better.”
Pump prices have dropped by nine cents a gallon since the first week of April to a national average on Tuesday of US$3.85. A year ago, the average price was $3.86 per gallon.
The price of gas in the U.S. is coming down now because crude oil prices are lower and refineries, which turn crude into gasoline and other refined products, are getting back up to speed.
In Canada, the price averaged C$1.329 per litre, up from $1.30 per litre, according to price-watching website GasBuddy.com.
OPIS said that drivers in the Midwest and Great Lakes states are seeing the biggest drop in gasoline prices. Pump prices in Minnesota are 21 cents a gallon cheaper than they were a year ago. In Michigan, they are down 16 cents a gallon. Prices also dropped by 10 cents or more in Iowa, Indiana, Missouri, Nebraska, Ohio, Oklahoma, and Wisconsin.
The drop at the pump should be a relief for drivers, after some earlier predictions said that Americans would pay a record $5 per gallon for gasoline this summer. As gasoline gets cheaper, analysts say Americans probably will be more likely to head out on summer road trips. They also may be more willing to open their wallets at convenience stores, hotels and tourist destinations.
OPIS expects gasoline prices to keep falling a little more over the next few weeks. Gasoline futures contracts, which are quickly reflected in pump prices, have dropped by seven per cent this month, including a one per cent drop on Tuesday.
Last year gasoline prices ranged from a high of $3.985 per gallon last May to a low of $3.206 per gallon in December. They rose again this year, peaking at a national average of $3.946 on April 6, following a surge in oil prices and concerns about refinery closures on the East Coast.
While pump prices were rising, drivers started buying less gas. MasterCard SpendingPulse estimated that U.S. motorists bought 2.55 billion gallons of gasoline last week, down 6.1 per cent from the same week in 2011. Americans have found a variety of ways to cut down on driving, MasterCard economist Michael McNamara said. For example, consumers skipped trips to the mall and instead bought clothing and other goods online.
“When you look at the overall retail environment, the American consumer has weathered this storm pretty well,” McNamara said in a conference call with reporters.
On Tuesday gasoline futures prices fell by 2.8 cents to finish at $3.1593 per gallon in New York.
Meanwhile, oil prices were mixed as investors weighed strong U.S. corporate earnings with ongoing concern about European debt. Benchmark West Texas Intermediate crude rose Tuesday by 44 cents to end at $103.55 per barrel in New York. Brent crude, which is used to price international crudes, fell by 55 cents to finish at $118.16 per barrel in London.
Europe continues to be saddled with massive government debt, and borrowing costs rose Tuesday in Italy and Spain. In the U.S., stocks markets rose following strong first-quarter earnings from AT&T and 3M.
In other energy trading, heating oil gave up 1.03 cents to finish at $3.1295 per gallon while natural gas futures declined by 3.2 cents to end at $1.975 per 1,000 cubic feet.
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