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Gas and heat are cheap, but consumers may not care

It's rare that gas and heating oil prices drop in price together at this time of year, but it's happening. Experts say it may not matter to 'grumpy' consumers.

By Money Staff Oct 28, 2013 1:39PM

This post comes from Jackie DeAngelis at partner site CNBC.

 

CNBC on MSN MoneyIt's getting cheaper for Americans to fill their tanks and heat their homes, but analysts warn that consumers are unlikely to show signs of an economic windfall.

 

The national average for a gallon of regular gasoline now runs $3.31, down 13 cents in a month and lower by 28 cents from the same time a year ago, according to Triple A's Fuel Gauge Report.

 

Buying gas © moodboard/CorbisTraders expect prices at the pump to decline even further, for several reasons: There will be less demand for gasoline in the fourth quarter, and refineries will shift to a cheaper, winter blend. Also, the price of underlying commodities like crude oil and Rbob gasoline are likely to move lower. West Texas Intermediate closed at $97.85 on Friday, off 11.5 percent from its 52-week high, and Rbob gas finished at $2.59, off 22 percent from its high this year.

 

Anthony Grisanti, president of GRZ Energy, thinks prices at the pump could go as low as $3.10. That would be a 17 percent decrease from their February high of $3.74.

 

"I see $3.10 at the pump by year end," said Grisanti.  "I see price declines in Rbob gasoline to around $2.40 to $2.50. The average amount for taxes and fees is 50 to 60 cents. That's how I get to $3.10."

 

Why gasoline is sliding

Other market participants are less optimistic. "I expect pump prices for regular gasoline to be $3.15 to $3.20 per gallon, down only slightly from the current average," said Jim Iuorio, managing director of TJM Institutional Services. "It always seems like pump prices are quick to rise as gas and oil futures climb, but slow to fall in the reverse situation."

 

Tom Kloza, chief oil analyst with Gasbuddy.com, said the general industry formula is for every dollar price drop in crude, the price of gas comes down about two and a quarter cents. Iuorio thinks crude prices can fall to $90 by the end of the year, indicating that gasoline could come down another 18 cents.

 

It's not just fuel costs that are falling -- heating homes this winter could be less expensive as well. Commodity prices for natural gas and heating oil have seen a sharp drop, with natgas 16 percent lower in the last six months and heating oil down 6 percent in the last two months.

 

But traders warn there could be some volatility ahead.

 

"Three of the last four years, natgas prices have risen in the last 10 weeks of the year. I expect this year to be no different," Iuorio said. "But I don't think that the rise in prices will have a significant economic impact due to the historically low prices we are seeing."

 

'Consumers are grumpy'

Iuorio pointed out that heating oil appears to have broken out of a well-defined uptrend, but he said that "the a decline in heating oil prices will have limited impact because only about 6 percent of the homes in the U.S. use heating oil."

 

Still, as energy costs come down, many are wondering if consumer spending will be up?

 

Kloza said it might not help as much as one might expect. "Consumers are grumpy and they're like sort of the old man, you know, that's returning a bowl of soup at the deli. They're not gonna drive more," he said. "They're not gonna take more vacations."

 

"It's rare historically to see natgas and heating oil to drop together at this time of year. It's a nice break for consumers of both," said Jeff Kilburg, founder & CEO of KKM Financial.

 

However he warned that if the U.S. experiences just a 10 percent colder winter than usual, then heating oil consumers will see a 25 percent spike in their bills.

 

"#NotGoodMathForConsumer." Kilburg joked.

 

More from CNBC:

 

 

17Comments
Oct 28, 2013 4:32PM
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Wow. What a bullsh*t, propaganda article. Fuel prices haven't dropped one damn bit, so why would consumers "care" that the price per barrel has dropped? It's not helping us one damn bit.

It hasn't got cheaper to fuel cars or heat homes... or buy food... or buy anything. Where do you media puppets pull your bullsh*t from?

"down $.13..."    13 whole cents.....     Seriously!!!!!!!!!!!!!!!!!!!!!!!!??????????????????????????????????

Oct 28, 2013 6:33PM
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wow!  with the lower gas prices and my new cost of living adjustment on my SS  I won't know what to do with all that extra cash. Guess I'll ask my congressmen what their doing with theirs!
Oct 28, 2013 5:18PM
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It wasn't that long ago that gasoline prices were nearing $4. So on a relative level, it's better than it was but still expensive since Wages aren't rising. Heating Bill, those crooks will charge whatever they want, whenever they want.
Oct 28, 2013 5:51PM
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We've been hearing about $3.00 a gallon for gas since last winter, it's coming, be patient. Yeah right, check out their profits, as we all know that's the bottom line.
Oct 28, 2013 8:09PM
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I paid $4.19 gallon for regular gas in my town today and drove to the next town and got regular gas for $3.59 a gallon. Figure this out!  By the way, I only got a few dollars worth in my town because I was on fumes.  This is highway robbery to me!  I don't know how they get away with it!  Westchester County, NY
Oct 28, 2013 5:23PM
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screw them all, dam right were angry!, hopefully all consumers will cut spending and close our wallets, never fails one thing goes down another will raise. example Obama care is going to screw us all!, I mean all of us that are dumb enough to work for a living, while the welfare scum continue to suck out the welfare system.
Oct 29, 2013 10:00AM
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Falling food cost article and this one must be nice living on Fantasy Island ze plain boss ze plain!
Oct 29, 2013 10:43AM
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cheap??? 3 bucks a gallon isn't cheap enough! when it was 2 bucks a gallon msn and other bias media
went bezerk on Bush but oh it's Obama's economy so 3 bucks is cheap! where was the bias media
for the last 4 years when it was over 3 bucks a gallon? with his nazi EPA shutting down and causing
small business to shut down and jobs lost for over regulations all for the FAILED GREEN AGENDA!
MSN PULLED A STORY ON OBAMACARE WHEN THEY GOT THOUSANDS OF COMMENTS THAT
WERE NOT FOR OBAMACARE AND TOLD PEOPLE THE HORROR STORIES GOING ON IN
REAL LIFE NOT THE OBAMA DEMONCRAT FAIRY TALE WORLD OF OBAMA DEATHCARE! THEN
THEY PUT IT BACK ON WITHOUT ALL THE COMMENTS! WHY? OBAMA THREATENED THEM??
THIS MAN IS A THUG CHICAGO POLITICAN WHO THINKS HE'S A FING DICKTATOR! HE LIED
ABOUT KEEPING YOUR DOCTOR THE COST AND DEATHPANELS! WHAT ELSE HAS HE
LIED ABOUT? EVERYTHING! IT'S ALL A LIE INCLUDING HIS PAST! WHERE IS THE REAL MEDIA?
I BUY THE SAME AMOUNT OF FOOD AS I USE TO AND PAYING DOUBLE! COST DOWN? NOT!

Oct 29, 2013 9:41AM
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Didn't I just see a story on MSN Money (October 8th) that said natural gas prices will be higher this year than they were last winter ?  Here's the quote:

 

"Natural gas should average $11 per thousand cubic feet, the government said. That's $1.33 more than last year, but still below the nearly $13 per thousand cubic feet that homeowners paid in the winter of 2008-2009."

 

Looks like the same fuzzy math the president used when he assured everyone their insurance costs would not rise under Obamacare.

Oct 28, 2013 7:10PM
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Declining heating fuel prices are of little to no interest to people living in the Sunbelt.
Oct 29, 2013 5:56PM
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Natural gas prices remain high in California. The energy boom is not bringing benefits to CA. 
Oct 29, 2013 9:57AM
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Gas is $3.02 at Sam's Club here in suburban Mpls.     What's he talking about $3.11?
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