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

  • Canadians set record with U.S. real estate shopping spree

    Economic CBC News
    New Brunswick's Joel Levesque had no idea he was helping set a record when he bought a home in Fort Myers, Fla., back in April. The 63-year-old semi-retired public affairs professional wanted a place to escape for the winter and didn't feel like waiting around for the loonie to gain ground on the greenback. Source
  • Debt got you down? Start a debt-destruction club

    Economic CBC News
    If you run, hide, or plug your ears every time the topic of money comes up, you're not alone. But as the era of ultra-low interest rates comes to an end, you need to force yourself to face your finances. Source
  • Ontario transit agency won't let Bombardier bid to operate commuter trains

    Economic CTV News
    MONTREAL -- Ontario's transit agency has decided not to appeal a court ruling favouring Bombardier but will exclude the Montreal-based company from bidding to continue operating GO Transit trains as it has done for decades. Source
  • Business groups blast Ontario labour proposals on last day of consultations

    Economic CTV News
    TORONTO -- Unions and advocacy groups made one last effort Friday to sway the Ontario government on its plan for sweeping changes to the province's labour laws, with some sounding the alarm about what they deem drastic measures and others arguing the proposal doesn't go far enough. Source
  • Marijuana companies band together to develop marketing guidelines

    Economic CTV News
    TORONTO -- Sixteen of Canada's licensed marijuana producers have enlisted the help of Advertising Standards Canada to develop guidelines on how the drug should be branded and promoted before its recreational use becomes legal next year. Source
  • Husky Energy set to repair pipeline that spilled crude into river a year ago

    Economic CTV News
    CALGARY -- Husky Energy (TSX:HSE) says it has been granted permission to repair and replace a section of pipeline that leaked 225,000 litres of crude in Saskatchewan just over a year ago. Chief executive Robert Peabody said that it will be applying lessons learned from the spill on the rebuild. Source
  • Ford says it will fight latest Takata recall

    Economic CTV News
    DETROIT -- Ford is fighting the latest expansion of the Takata air bag inflator recall. Earlier this month Takata filed documents with the U.S. government adding 2.7 million vehicles to the recall from Ford, Nissan and Mazda. Source
  • FedEx to close all Office Print and Ship Centres across Canada

    Economic CTV News
    FedEx Canada has announced that it will be closing all of its FedEx Office Print and Ship Centres, across Canada. All 24 centres, the manufacturing plant, and the head office in Toronto will close. Source
  • Car buying pushes retail sales up for third month in a row in May

    Economic CBC News
    Strong auto sector activity helped Canadian retail sales activity rise for a third straight month in May, climbing by 0.6 per cent to $48.9 billion, Statistics Canada said Friday. The monthly increase was double the consensus expectation of economists Source
  • Judge OKs $11.2M settlement for hacked Ashley Madison users

    Economic CTV News
    ST. LOUIS -- A federal judge on Friday approved an US$11.2 million settlement between the marital infidelity website Ashley Madison and users who sued after hackers released personal information, including financial data and details of their sexual proclivities. Source