Falling gas prices lift economy

A more than 30-cent drop from last year puts cash back in consumers' pockets and could help counter recent cuts.

By Jason Notte Apr 24, 2013 3:58PM
Image: Buying gas -Somos Image, CorbisBetween the fiscal cliff deal and the sequester hikes and cuts, is there anywhere the American consumer's finances aren't getting squeezed?


Surprisingly, it's at the pump. Over the past three weeks, the price of oil fell 9% to $89 a barrel. While a short supply of expendable income also may be tamping down demand for gas a bit, both the Department of Energy and AAA note that the average price of a gallon is down more than 33 cents from a year ago.


The average price for a gallon of regular gas is hovering around $3.55, but research firm Capital Economics told CNN it estimates that price will slide to nearly $3.40. That would save American consumers roughly $80 billion over the course of 2013, which is about the size of the sequestration cuts.


It's a bit too late for falling gas prices to help growth in the first quarter, which economists are estimating at 3% before the government releases those numbers later this week. It could, however, soften the blow of other cuts and bolster spending in the second quarter.


Still, some companies complain that consumer spending was stifled well before the sequester. The expiration of payroll tax cuts that followed the fiscal cliff deal shrunk paychecks, blunted the impact of state-by-state minimum wage hikes and gave consumers less expendable income to blow at discount stores like Family Dollar (FDO) and Dollar General (DG) or eateries like Brinker International's (EAT) Chili's and Darden Restaurants' (DRI) Red Lobster and Olive Garden.


That doesn't mean there isn't reason for consumers to cheer lower gasoline prices or the trends that may keep them low for some time. Gasoline prices typically rise in the late winter and spring as refiners shut down parts of their plants for maintenance and begin making more costly blends of gasoline required by federal clean-air regulations. That didn't happen this year, as prices were 15 cents shy of last year's peak.


A big reason for that is increased oil production in the U.S. and Canada, which is boosting global supplies. It also helps that North Africa and the Middle East haven't been plunged into further political turmoil and that U.S. refineries have been remarkably calm after supply disruptions in California and along the East Coast last year.


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210Comments
Apr 24, 2013 4:38PM
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I hope that we do not get too comfortable, because between Greed on Wall Street and in Washington along with free money from Uncle Ben, prices will certainly be going up again. Oil at $91 a barrel when it should be $60 a barrel and people wonder why our economy is in the cellar. That is where our economy is going to stay because Wall Street will not let oil prices drop, no matter how much demand is down or how much we gain and they can do it because they answer to nobody. Some blame high oil on the global market, but Good Ole Wall Street is the driving force behind high oil prices. If these clowns were made to take full physical delivery of all oil futures bought, it would be a different ball game, but that will probably never happen because Wall Street and Big Oil have our politicians in their hind pockets.
Apr 24, 2013 4:46PM
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Falling as prices my azzz - still pushing 390.00 a gallon in No Cal. I think MSN has basically become an arm of the government - they seem to put out a lot of nonsense and propaganda that sounds like a GSA press release.
Apr 24, 2013 4:25PM
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A $0.30 per gallon drop equals about $4.50 a week in savings. Can't even get a decent lunch for that amount.

Big deal.

Apr 24, 2013 4:45PM
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My power bill last year was around $40 for this same month, this year it is $120.  So how am I saving?  I'm just being shafted somewhere else!
Apr 24, 2013 4:50PM
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Just went past my usual station today and the price was up 20 cents in three days - to $4.15/gallon. Where are the prices falling??
Apr 24, 2013 4:46PM
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Big deal. It still doesn't save me enough money for other things.
Apr 24, 2013 5:01PM
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Prices falling? Where? Are you kidding me?
Apr 24, 2013 5:17PM
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It'll be a story when prices get back to $1.80 a gallon like it should be.
Apr 24, 2013 4:47PM
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So silly, we as the general public have zero to say in what happens with this product.
Apr 24, 2013 4:52PM
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I don't know where prices are going down they went up a nickle here yesterday. I think MSN is about 2 weeks late on this one
Apr 24, 2013 4:53PM
Apr 24, 2013 4:57PM
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Really where?   Here the price is set by two men who own all the stations.  When complaints were made to the state the attorney general said "Well they have to make a profit."   30 miles from here it is 30cents cheaper.  50 miles 50 cents cheaper.

 

Price fixing anyone.

Apr 24, 2013 5:02PM
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Its nice to save a few dollars on gas but ultimately consumers need stable economic growth (Good paying jobs) to keep up with inflation.  
Apr 24, 2013 5:05PM
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What falling gas prices??  Gas in the burbs outside Chicago just went up $.40 since yesterday to $4.15.
Apr 24, 2013 4:51PM
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Apparently Michigan didn't get the discount. Still too high. I also agree that the savings isn't going to do anything to lift the economy. Closing Exxon Mobil and flushing the ill-gotten cash that trash has taken from economy might. Let's try it and see if those pompous fat assses can live out of dumpsters like we have all had to. Where's a fair and just government when you need one?
Apr 24, 2013 4:53PM
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Should be about half what it is. Besides the states increasing the gas tax. Just what we need. CUT INCOME TAXES AND RAISE IT ON THE STATE LEVEL. What did we gain?
Apr 24, 2013 5:24PM
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Falling gas prices!! Are you guys idiots? Two days ago the price per gallon at my local station was $3.81. Today it is $4.15!!

 

I can't even call you guys "masters of the obvious" any longer! Just masters of the completely

uninformed!!!!!

Apr 24, 2013 5:01PM
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Can somebody explain to me why oil is over $91 then?
Apr 24, 2013 5:01PM
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Gas prices hurt low income people the most.  Let's get the pipeline built and have U.S. and Canadian oil flowing across the country.  No more $$ going to the Middle East or other countries that hate us.

 

Put controls on speculators, especially those who never take delivery.

 

Gas was $3.34 in central MN today.  Great!

Apr 24, 2013 5:02PM
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Time to break out the suv's.Goodbye electric car.

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