Gas bust a boon, but will it stick? Filling station visits arouse less dread
Those dreaded trips to service stations this summer to get gas at more than $4.50 a gallon were repeated body blows to consumer confidence, but the dramatic collapse of prices may help resurrect buying habits and salve the sagging economy.
Gasoline not only has dropped below $2 a gallon nationally, it has fallen 48% since Labor Day. That’s by far the biggest plunge from the last major summer weekend to Thanksgiving the Energy Department has ever recorded.
“Consumers are in serious need of something uplifting, and gasoline prices are high on that list,” said Edward E. Leamer, director of the UCLA Anderson Forecast. “These prices won’t raise SUV sales back to where they were, but they might help make it a better holiday retail season.”
Hilda Delgado, 33, of Los Angeles couldn’t remember the last time she felt good about buying gasoline. On Wednesday, she paid just $31 for a fill-up instead of the $60 hits she took during the summer.
“It feels like such a relief. I had to check the tank after I paid just to make sure it was really full,” said the marketing consultant, who drives as many as 2,000 miles a month visiting clients.
“It feels so good that I can’t really explain it very well.”
But the cost of gas will have to stabilize at lower prices for a while, and the effect has to ripple through the economy and spur companies to pass along the savings to their customers, before people get that old confidence back, analysts said.
And that may take time. Some businesses, such as airlines, overreacted and bought large amounts of fuel because they believed prices would go even higher, said Jack Kyser, chief economist for the Los Angeles County Economic Development Corp. Now they are stuck with stockpiles of expensive fuel as prices continue to fall.
“They paid a lot when prices were on the way up, and they are still paying, in effect, as prices drop,” Kyser said.
Still, the pump-price plunge amounted roughly to an economic stimulus package -- one that didn’t require weeks of congressional debate, said W. Bruce Bullock, director of the Maguire Energy Institute at Southern Methodist University in Dallas.
“It’s about $200 billion in people’s pockets that didn’t go to the oil companies,” Bullock said. “People will still feel poorer overall, but they can be grateful for not losing that much more on top of everything else they have suffered.”
Prices often drop from Labor Day to Thanksgiving, then rise through the rest of the holiday season before dropping to low points in January, said Tom Kloza, chief oil analyst for the Oil Price Information Service.
But that pattern was turned on its head last year as prices rose rapidly and steadily from Labor Day to record highs last summer of $4.114 nationally and $4.588 in California.
Heading into this year’s Thanksgiving holiday weekend, prices are still dropping, down 2 cents overnight Tuesday to $1.868 nationally, according to the AAA Fuel Gauge Report. The price of a gallon of self-serve regular in California also crept closer to the $2-a-gallon barrier, down more than 3 cents overnight to $2.066 a gallon.
Elsewhere, gasoline was averaging just $1.571 a gallon in Missouri, the cheapest state, according to the daily survey of credit card receipts from 10,000 gas stations around the U.S. compiled by the oil price service and Wright Express. It was as low as $1.37 a gallon there and as low as $1.68 a gallon in parts of Southern California, according to the national network of price monitoring websites called Gasbuddy.com.
Kloza had thought the bottom was near, but now he’s not so sure.
“You would have to go to John D. Rockefeller and the Standard Oil breakup to find a drop like this. I’ve never seen anything like it,” Kloza said.
Tempering the giddy mood, however, was Wednesday’s $3.67-a-barrel increase in crude oil futures for January delivery. Still, the closing price of $54.44 on the New York Mercantile Exchange was 63% off the intraday record of $147.27 a barrel in July.
Greg Kimble had that roller-coaster dive in mind Wednesday as he filled up Mable, his 1969 white-topped, LeMans-blue Chevy Impala convertible. The visual effects supervisor was thrilled he could once again drive Mable without guilt.
“The supply of oil never really changed at all, but I couldn’t even fill my tank because my gas card had a $75 limit on it,” said Kimble, 57, of Los Angeles. “Now, it costs me half that much. I’m just hoping it lasts a while.”
With the wild swings in prices, he said, “you’re left to wonder, ‘What the heck just happened?’ It never made any sense.”
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