Even as gas prices rise, U.S. drivers will still save at the pumps

DALLAS - Gasoline prices have started their annual springtime migration higher, but motorists should still save money at the pump in 2016.

See Full Article

The national average price for a gallon of regular has risen for eight straight days -- the first time that has happened since last May, according to the auto club AAA -- to about $1.79 on Wednesday. That's still 54 cents cheaper than at this time last year.

Forecasters say prices should rise at least 30 cents or more by June. Demand will rise as people drive more, and supplies will tighten when refiners slow down to perform maintenance and switch to more expensive summer fuel blends.

The U.S. Energy Department predicts that the national average for a gallon of regular gasoline will peak at $2.08 from June through August. Tom Kloza, an energy analyst with the Oil Price Information Service, says the peak will be between $2.10 and $2.50 a gallon.

Either forecast would leave prices well below recent years. From 2011 to 2014, the national average on June 1 topped $3.60 and some places saw gas over $4.

Gas is cheaper because a glut of crude has caused oil prices to tumble. Even with a 30 per cent rally since Jan. 20, benchmark U.S. crude closed Tuesday down 68 per cent from its June 2014 peak.

Motorists may enjoy the relative bargain for a while. The Energy Department expects crude prices to average about $38 a barrel this year and $50 next year. That forecast was made before Saudi Arabia's oil minister forcefully rejected production cuts during a speech to a major oil-industry conference last week in Houston.

Oil prices have been undercut by demand that turned out to be weaker than expected, especially in China and other developing countries. But for the most part, it's a case of oversupply -- more crude is gushing into world markets than consumers and industry need.

Last month, commercial inventories of U.S. crude topped 500 million barrels for the first time; they are more than one-third above their five-year average. Iran is expected to produce more oil now that it is free from international sanctions. And producers like Saudi Arabia, who could cut supply to prop up prices, are continuing to pump away instead.

Lower oil prices have led to layoffs at drilling companies and contributed to weakness in the stock market, but cheaper gasoline and heating oil are putting more money in consumers' pockets.

The U.S. Energy Department estimates that the average household saved $660 because of cheaper gas in 2015 and will save another $320 this year.

Chris Christopher, director of consumer economics at research firm IHS, said consumers will gradually spend more of their gas savings as they believe that cheaper pump prices will last a while. More consumer spending should boost the economy.

"In West Texas, they are in a recession," Christopher said, "but it's a net positive for the United States and most developed economies that don't depend too much on energy prices for their livelihood."

Last year, the JPMorgan Chase Institute looked at records from 26 million debit and credit card holders and concluded that gas savings varied greatly by income and region. The card holders spent about 80 per cent of their savings, almost 20 per cent of it at restaurants. They also increased spending at department stores and on entertainment, electronics and appliances.

The institute's CEO, Diana Farrell, said even though consumers are still saving money compared with 2015 gas prices, they might not spend it if they don't see the price at their gas station falling any lower. "They may no longer feel like they have that extra money in their pocket," she said in an interview.

Gasoline prices vary by region of the country. Californians usually pay among the highest gas prices, and on Tuesday the average for regular there was $2.41 a gallon -- only Hawaiians paid more. Arizona had the cheapest average at $1.53 a gallon, according to AAA.

A few stations even sold gas for under $1 last month, although they appeared to be marketing gimmicks, said AAA spokesman Michael Green.

Several stations in Oklahoma City were under $1.10 in February, but that was before two refineries serving the central U.S. announced cutbacks in production because of low prices. On Tuesday, the best price in Oklahoma City was $1.45, according to GasBuddy.com.

"That flirtation with less-than-$1 gas is over," said Kloza, the oil analyst.



Advertisements

Latest Economic News

  • Russia says oil production cuts may continue to boost prices

    Economic CTV News
    KUWAIT CITY -- Russia's energy minister says there's "94 per cent" compliance on a six-month oil production cut among OPEC members and non-cartel nations, as well as discussions about continuing the cuts to boost crude prices. Source
  • Iran imposes sanctions on 15 U.S. companies

    Economic CTV News
    TEHRAN, Iran - Iran has imposed sanctions on 15 American companies over their alleged support for Israel, terrorism and repression in the region. A Foreign Ministry statement carried by the state-run IRNA news agency Sunday said the companies are barred from any agreements with Iranian firms and that former and current directors will not be eligible for visas. Source
  • How to roll up the rim without buying coffee

    Economic CBC News
    You don't need to make a purchase to enter contests such as Tim Hortons' Roll Up The Rim To Win. But sometimes the alternatives are just as costly. (Tim Hortons ) Despite the well-known slogan, you don't actually have to roll up the rim to win. Source
  • Convenience or comparison? Why sticking with 1 bank might not be the best option

    Economic CBC News
    Consumers love the convenience of one-stop shopping for their financial needs — but it could be costing them. In a poll conducted by Ipsos and commissioned by LowestRates.ca, an online interest rate comparison site, six in 10 Canadian respondents said they prefer to have all their financial products and credit cards at one bank. Source
  • More TV streaming services join U.S. market, leaving Canada far behind

    Economic CBC News
    YouTube's announcement that it will soon launch an online TV streaming service cut deep for some Canadians. That's because it's not coming here. YouTube TV will offer more than 40 live TV channels for only $35 US a month. Source
  • Poker tables keep decreasing on Las Vegas casino floors

    Economic CTV News
    LAS VEGAS -- When the Monte Carlo closes its eight-table poker room in about a month as part of a $450 million overhaul, the Las Vegas Strip will have lost nearly a quarter of the tables it had a decade ago. Source
  • Las Vegas casinos continue to close poker rooms

    Economic CTV News
    LAS VEGAS -- When the Monte Carlo casino closes its eight-table poker room in about a month as part of a $450 million overhaul, the Las Vegas Strip will be down nearly a quarter of the tables it had a decade ago. Source
  • Google's YouTube loses more advertisers over offensive videos

    Economic CBC News
    An advertising boycott of YouTube is broadening, a sign that big-spending companies doubt Google's ability to prevent marketing campaigns from appearing alongside repugnant videos. PepsiCo, Walmart Stores and Starbucks on Friday confirmed that they have also suspended their advertising on YouTube after the Wall Street Journal found Google's automated programs placed their brands on five videos containing racist content. Source
  • National contest tries to convince students that lucrative sales jobs are 'sexy'

    Economic CBC News
    Sonya Meloff wants everyone to know that a career in sales is sexy. Not sleazy. "I think that sales is a really sexy job," says the founder of the Toronto's Sales Talent Agency. "You get to be at the forefront of representing a company, you're the one that gets to talk to the customers. Source
  • Report examines grim Bangladesh leather trade, links to West

    Economic CTV News
    DHAKA, Bangladesh -- Hazardous, heavily polluting tanneries, with workers as young as 14, supplied leather to companies that make shoes and handbags for a host of Western brands, a non-profit group that investigates supply chains says. Source