Gas prices fall under $2, as energy savings pile up

20 Jan 2016 | Author: | No comments yet »

AAA Michigan: Gas Prices Fall 7 Cents In Past Week To $1.83.

The national average for gas was $1.998 per gallon. So as savings on everything from gasoline to heating oil pile up, a key question is whether consumers will spend those extra dollars and help drive the economy further.

In the Lower 48 states, the highest average price of regular gasoline is in Los Angeles, at $2.71, while Tulsa, Oklahoma has the lowest, at $1.72, according to Lundberg. Families using natural gas to heat their homes are forecast to see savings of about $117, with a price drop to $560 this coming winter compared to $677 for the 2013-14 winter, estimates Mark Wolfe, director of the National Energy Assistance Directors’ Association, which focuses on home energy assistance. Economists, including Chris Christopher, director of consumer economics for IHS Global Insight, will be watching key data releases this month including a third-quarter reading on GDP, and consumer sentiment and confidence for December. “Employment reports have been good and falling pump prices are helping consumers feel more confident,” Christopher said. Anticipated savings in monthly home-energy costs could further lift consumers. “If the trend persists, they’ll learn to take that money and put it elsewhere,” he said. Plus, consumers dived into Black Friday deals, though the punch of the retail holiday may be ebbing. “Black Friday is not what it used to be,” Christopher said. “Spending and discounting is happening sooner, so Black Friday’s intensity is not as involved.” Looking ahead, the economist forecasts holiday sales to tally in relatively strong, about 3.4 percent growth year over year.

The personal saving rate, which measures the share of a person’s disposable income that is saved, was 5.6 percent in October, a notch higher than the prior month, according to government data. “Why isn’t this money moving into the economy like it should?” asked Wolfe of the Energy Programs Consortium. But Christopher of IHS notes the October data was as much about consumers stashing their income from rising wages, not so much that spending was subdued in certain areas. Moody’s dropped its price assumption in 2016 for Brent crude oil, the international benchmark, to $43 from $53 per barrel and for West Texas Intermediate (WTI) crude, the North American benchmark, to $40 from $48 per barrel.

This combo of ample production and rising gasoline inventories are likely to keep pump prices relatively low. “And barring any unforeseen shifts in market fundamentals, averages are likely to continue to decline leading into 2016,” according to AAA. And despite short upticks, natural gas prices are also at multiyear lows, as warm weather has hit the prime winter heating season. “Heating degree demand has been weaker than expected in pretty much every metro area,” said Paul Hickey, co-founder of the Bespoke Investment Group. “I think the longer-term trend is continued weakness here,” Hickey told CNBC on Dec. 14.

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