Oil and Gasoline Prices Drop Quickly, Quietly
STEVE INSKEEP, host:
From NPR News, it's MORNING EDITION. Good morning. I'm Steve Inskeep.
LYNN NEARY, host:
And I'm Lynn Neary. What goes up must come down, and gasoline prices are coming down fast. The average price of a gallon of gasoline fell by $0.42 over the last five weeks. In some parts of the country gas is selling for under $2.00.
Experts say the money consumers save at the gas pump should help prop up other parts of the economy.
NPR's Scott Horsley reports.
SCOTT HORSLEY: California typically has some of the most expensive gasoline in the country. But even here the average price broke below $3.00 a gallon this past week. Consumer advocate Michael Shames, who runs a gasoline shopping Web site, says pulling up to the gas pump no longer packs the dread that it did a couple of months ago.
Mr. MICHAEL SHAMES (Executive Director, Utility Consumers' Action Network): Filling up used to be painful, like going to a dentist. Now it's like going to a dentist, but at least the dentist is giving you Novocain.
HORSLEY: If that's true here on the West coast, drivers must feel like they're on laughing gas in the middle of the country where some stations are now selling gas for as little as $1.99.
Ms. CARLA DICKERSON(ph) (Attendant, Jackson Bait & Tackle): Well, everybody's happy.
HORSLEY: Carla Dickerson was working the gas register at Jackson Bait & Tackle in Jackson, Missouri this past week. She says customers are buying plenty of other items with the extra change they get from filling up.
Ms. DICKERSON: Beers, soda, candy, chips, snacks and food.
HORSLEY: Chief economist Nariman Behravesh of Global Insight says the falling price of gasoline should give a boost to other types of consumer spending.
Mr. NARIMAN BEHRAVESH (Chief Economist, Global Insight): I think we'll see people taking some of those savings, if you will, or what they don't need to spend on gasoline, on discretionary items like eating out and, you know, going to a game, going to a concert. That kind of stuff.
HORSLEY: The impact is limited. Rising gasoline prices didn't cause wholesale changes in consumer behavior, and falling prices won't either. But JP Morgan economist Robert Mellman says cheaper gas should help to offset some of the drag on the economy from falling home sales.
Mr. ROBERT MELLMAN (Economist, JP Morgan): This is an important influence that will help the economy sail through to the end of the year.
HORSLEY: Mellman expects gasoline prices to keep falling by another $0.25 a gallon or so. Some savvy customers are only buying half a tank at a time, knowing gas could be cheaper by this time next week.
If the price continues to fall, that could discourage some newfound interest in fuel economy. It could also accelerate our growing demand for gas.
(Soundbite of racing cart engine)
At the Miramar Speed Circuit in San Diego, grown men zip around a quarter mile track in miniature racing carts. Carey Harver(ph) is here on his lunch hour with some colleagues from a local software company. Harver wears a T-shirt that says: Do Not Taunt the Web master.
Mr. CAREY HARVER (San Diego): You get to go fast and there's no consequences.
HORSLEY: Well, there are some consequences. As small as these cars are, general manager Jared Booher says they burn through a good bit of gasoline over the course of a day.
Mr. JARED BOOHER (General Manager, Miramar Speed Circuit): When the gas prices come down we see it more than even the next guy, because you can imagine how much gas we buy throughout the course of a month.
HORSLEY: The go-carts twist and turn, but ultimately wind up back where they started. Consumer advocate Shames is wondering if gasoline prices will do the same.
Mr. SHAMES: I think everybody is sort of holding their breath, waiting to see is this a real drop that's going to be sustained, or is this a little blip, and then suddenly prices are going to shoot back up next year? Customers aren't sure where the markets are going, and they shouldn't feel so bad because people who make their living trading the oil markets don't know where the market is going.
HORSLEY: Phil Flynn is one of those professional traders. He says the psychology behind oil and gasoline prices can turn just as sharply as go-carts.
Mr. PHIL FLYNN (Energy and General Market Analyst, Alaron Trading): If you look to three weeks ago, we were worried about war in the Middle East. You know, we were worried about Iran. We were worried about hurricanes. You know, the market took off. Now a lot of those fears that we've had last week have gone away.
HORSLEY: Indeed, the Energy Department said this past week the global situation for oil markets is "about as rosy has it's been for months." Nevertheless, the department expects oil and gasoline prices to level off and possibly increase later in the year.
Scott Horsley, NPR News, San Diego.
NPR transcripts are created on a rush deadline by a contractor for NPR, and accuracy and availability may vary. This text may not be in its final form and may be updated or revised in the future. Please be aware that the authoritative record of NPR's programming is the audio.