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.


Latest Economic News

  • Police, soldiers move in to force Dakota Access protesters off private land

    Economic CBC News
    Armed law enforcement officers and soldiers, including some in riot gear, moved in on Thursday to remove Dakota Access pipeline protesters camped on private land in the path of the oil pipeline in North Dakota. Authorities with trucks, police cars, military Humvees and buses began the operation just before midday, with sirens blaring and officials telling protesters over a loudspeaker to move out. Source
  • National Bank cutting 600 jobs as part of digital shift

    Economic CBC News
    National Bank announced Thursday it will eliminate about 600 jobs as it aims to speed up its transition to the growing digital economy. At the same time, the Montreal-based bank said it will hire about 500 people, especially in sales and service and information technology functions. Source
  • Twitter shutting down Vine video service

    Economic CTV News
    Twitter is shutting down its Vine short-form video service amid other cost-cutting measures at the social media company which is bleeding money and struggling to find a buyer. Vine will be discontinuing its mobile app "in the coming months," with no specific date set at this point, according to a blog post on Medium, which is owned by Twitter co-founder Evan Williams. Source
  • About as many Canadians oppose recreational pot as support it, Deloitte survey finds

    Economic CBC News
    Forty per cent of Canadians in a recent survey said they support the notion of legalizing marijuana for recreational use, slightly more than those who said they oppose it. Deloitte surveyed 5,000 Canadians recently for their views on marijuana, and the results suggest a country that is very much divided on a topic that the federal government is currently trying to clarify the rules on. Source
  • How the trade agreement with the EU could benefit Canada

    Economic CTV News
    After seven years of negotiations, and a recent impasse between Belgium’s regional authorities, the free trade deal between the European Union and Canada could finally be signed over the next few days. Now that the holdout Belgian region of Wallonia is on board with the deal, the agreement now has to be formally approved by the parliaments of the 28 EU member nations. Source
  • Proposals and pre-nups: Marriage, co-habitation contracts can be good investment

    Economic CBC News
    A romantic proposal or an invitation to move in with a partner may seem like an awkward time to start planning for a smooth divorce. But with nearly half of Canadian marriages ending before death does couples part, a pre-nup can help individuals emerge from breakups financially unscathed. Source
  • Brookfield, Sagard in huddle to discuss next play for Performance Sports Group

    Economic CTV News
    TORONTO -- Two of the largest shareholders in Performance Sports Group have signed confidentiality agreements with each other and plan to discuss strategic options for the maker of Bauer hockey skates, Easton baseball gear and other sports equipment. Source
  • Twitter to cut 9% of its staff

    Economic CBC News
    Twitter Inc said Thursday it would cut nine per cent of its global workforce to keep costs down as the microblogging service reported quarterly results that beat Wall Street expectations, lifting shares. Third-quarter revenue growth slowed sharply but topped analysts' expectations. Source
  • PotashCorp Q3 profit plunges despite record volumes

    Economic CTV News
    SASKATOON -- Potash Corp. of Saskatchewan (TSX:POT) says it achieved record sales volumes for a third quarter, but saw its profit fall due to weaker prices for the three major types of fertilizer that it produces. Source
  • Cenovus Energy's operating loss grows despite cost-cutting progress

    Economic CTV News
    CALGARY -- Cenovus Energy Inc. (TSX:CVE) reported a $251-million loss for the third quarter and said Thursday it's looking for additional areas to cut costs. The loss amounted to 30 cents per share of the Calgary-based company, which is active in Alberta's oilsands, conventional oil production and oil refining. Source