Finally, you’re thinking, an economic indicator trending decidedly in my favor.
Interest rates? It’s been great if you’re a borrower, or refinancing a mortgage, provided you had the resources to get a loan or could find a bank to play along. As for interest rates on savings? Break out the magnifying glass.
Unemployment? It’s been declining, at an agonizingly slow rate, such that we’re only now back to where we were before this whole nonsense began.
Housing prices? Great if you were buying, not that many were, locked in as many were to where they were because of meager job mobility (see unemployment rate, above), or locked in to a home they couldn’t sell without taking a financial bath.
Gasoline prices? Now you’re talking.
AAA’s latest fuel-pump price report, both nationally and for the state of Washington, was a bit of Christmas come three weeks early with a promise of staying for months beyond Dec. 25. Nationally, AAA said the average of $2.67 per gallon is the lowest since February 2010, with that “lowest since” date likely to slip into 2009 when the next report is issued. By Christmas? Try $2.50.
Of course, Washingtonians are paying more than that average thanks to multiple factors including high gas taxes (55.9 cents per gallon, higher than both Idaho and Oregon, but if you think that’s a bite, note that several Midwest states are over 60 cents and New York wants almost 70 cents per gallon). The most recent statewide average for regular posted by AAA was $2.95, but to judge by windshield reporting of posted prices around the region, if you’re paying that much you’re doing it wrong.
Still, under $3 a gallon? Merry Christmas to one and all! Do we hear under $2? Not probable on average, says AAA, although that could happen at some individual stations in low-price states. “Crude oil would have to fall by another $25 to $30 per barrel to cause the national average to drop below the $2 per gallon threshold this winter, which remains unlikely,” AAA says. “The price of oil accounts for approximately two-thirds of the price at the pump, and a $10 per barrel drop in the price of crude oil results in about a 25-cent drop in retail prices for motorists.”
Yeah, fine, some of you might mutter, prices go up, they come down, they go back up. It’s the economy, or a refinery caught fire, or bad actors in the Mideast. Big deal.
Yes it is a big deal. Americans just got a pay raise without having their employers cough up a single extra nickel. Businesses just got a raise without making one additional sale; think of the fleets of trucks, planes, trains and boats that can be filled up for less. Even government got a raise, for the same reason as business (and without having its revenue affected, since the gas tax is assessed on quantity, not purchase price).
How big of a deal and how big of a raise? The Energy Information Administration predicts that U.S. regular gasoline retail prices, which averaged $3.51 a gallon in, will average $3.37 in 2014 and $2.60 a gallon in 2015. An Associated Press report calculates the savings at $100 billion a year based on current consumption levels.
Think paying 77 cents a gallon less (yes, we know, that’s on average, your mileage may vary) might be advantageous to your wallet? Think $100 billion freed up to spend or save might be of some benefit to the American economy?
Why yes it will. Better still, what is being spent on gasoline is increasingly being spent in this country, thanks to the boom in U.S. oil and gas production, instead of being shipped abroad. That phenomenon, for all the ink spilled on it, remains one of the underappreciated trends reshaping the U.S. economy and giving some hope for sustained economic improvement. Low prices are neither permanent nor guaranteed, and we could do another column just on the caveats to the forecasts, but what we’re dealing with is much more powerful and enduring than a seasonal blip.
Who won’t like this? Environmentalists, who fret that lower gas prices will encourage more driving. Advocates of hybrid and electric cars, who see low gas prices as removing the incentive for motorists to move to something else, but then developers of such technology could use some time to fix some of the nagging problems such as limited driving range on plug-in vehicles.
Most of the rest of the population, though, will happily take the boosts to their family’s financial well being and the nation’s economic status. After what they’ve been through since the onset and onslaught of the recession, in light of what they might still be going through, they deserve it — and what, if this plays out the way we think it might, is still to come.