Lower oil prices ease load on consumers and Obama

May 16, 2012, 9:55 PM

AP Business Writers

NEW YORK (AP) – A threat that’s been hanging over the economy is starting to look a lot less menacing.

Oil and gasoline prices are sinking, giving relief to businesses and consumers who a few weeks ago seemed about to face the highest fuel prices ever.

President Barack Obama’s re-election prospects could also benefit, especially if prices keep falling as some analysts expect. A majority of Americans disapproved of Obama’s handling of gas prices in an AP-GfK poll early this month. But that was before the full effect of the recent drop had reached drivers.

The average U.S. retail gasoline price has dropped 21 cents a gallon to $3.73 since hitting a 2012 peak of $3.94 on April 6.

The economy could gain, too. Consumers who spend less on fuel have more to spend on other purchases, from autos and furniture to appliances and vacations, that could help drive economic output and job growth.

The price drop will likely boost consumer confidence. It also comes at a timely moment: Ahead of the Memorial Day weekend, a busy one for travel and entertainment spending.

“It’s extra money in the wallets of most American consumers, and that’s going to help,” said James Hamilton, an economist at the University of California, San Diego who studies oil prices.

Lower oil prices also mean cheaper diesel and jet fuel for shippers and airlines.

Crude oil, which is used to make gasoline, is at a seven-month low of $92.81 a barrel. It’s down nearly 13 percent since May 1. Behind the steady drop are larger fuel stockpiles, easing fears about Iran and expectations of lower demand as the global economy slows.

The average national gasoline price is expected to fall as low as $3.50 a gallon this summer. It could even dip near $3 in some states. The national average is being propped up by refinery problems in California that have lifted prices well above the national average there, according to Tom Kloza, chief oil analyst at the Oil Price Information Service.

A 50-cent drop in the gasoline price would save consumers roughly $70 billion over a year.

Earlier this year, oil and gasoline prices were jumping from already high levels. Global demand was rising. And production outages were reducing supplies. Tensions between Iran and the West over Iran’s nuclear ambitions raised fears that output from the world’s third-biggest exporter would plunge.

The price of U.S. benchmark oil rose to about $110 a barrel from $96 in the first three weeks of February. The price for international oil, used to make most of the gasoline in the United States, spiked even higher: to $126 per barrel from $110 over roughly the same period.

Gasoline prices in the U.S. appeared on track to soar past $4 a gallon nationwide. Confidence among U.S. consumers, already suffering from high unemployment and scant wage growth, would have likely worsened.

“People were prepared emotionally for $4.50 or $5 gasoline, so there’s a sense of relief,” Kloza says.

No one is yet overflowing with glee over current prices. So far this year, gasoline has averaged $3.67 a gallon nationwide. If sustained all year, that would be the highest annual average ever.

John Heimlich, chief economist at Airlines for America, a trade group, is among those who aren’t ready to cheer. Jet fuel prices dipped below $3 per gallon for the first time in months Tuesday, he said.

“I need more than one day below $3,” Heimlich said. “I need weeks and weeks and weeks.”

John Tillman, who runs Certified Carpet Care in Wesley Chapel, Fla., spends $4,000 a month on fuel for his vans that crisscross the state, visiting restaurants and other clients. He says gasoline prices are still way too high and he thinks the government should do more to protect small businesses from high fuel prices. But he’ll take any drop he can get.

“It’s helped some,” he said.

Hamilton and other economists say high unemployment and a weak job market are more important to the health of the U.S. economy than gasoline prices. Still, voters tend to blame presidents for high fuel prices, even if there’s little a president can do to influence them.

It’s less clear that voters give a president credit when gasoline prices fall.

Michael Dimock, associate director at the Pew Research Center, suspects that voters won’t exactly thank Obama for $3.75 a gallon gasoline. Still, it dulls a weapon that his presumptive Republican challenger, Mitt Romney, would like to use to unseat the president.

And Obama can look forward to further help this fall. After Labor Day, refiners can begin using cheaper ingredients to make gasoline because wintertime clean air rules are less stringent. That should push gasoline prices lower between Labor Day and Election Day, barring hurricanes that can disrupt supplies or other global events, says Kloza.

“History will be working on behalf of the Democrats,” he said.

___

Wiseman contributed from Washington. AP Staff writer Charles Babington contributed to this report from Washington.

Jonathan Fahey can be reached at
http://twitter.com/JonathanFahey.

(Copyright 2012 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.)

United States News

Associated Press

Northern California wildfire threatens 500 buildings

BRIDGEPORT, Calif. (AP) — A wildfire that erupted in Northern California forced evacuations as it threatened about 500 homes and other buildings Tuesday, authorities said. The Rices Fire erupted at around 2 p.m. near the Yuba River in Nevada County and had spread to more than 500 acres (202 hectares) by nightfall, said Unit Chief […]
23 hours ago
Rich Morris of Toadflax Nursery helps to plant marijuana seedlings at Homestead Farms and Ranch in ...
Associated Press

New York’s 1st legal marijuana crop sprouts under the sun

CLIFTON PARK, N.Y. (AP) — New York’s recreational marijuana market is beginning to sprout, literally, with thin-leafed plants stretching toward the sun in farms around the state. In a novel move, New York gave 203 hemp growers first shot at cultivating marijuana destined for legal sales, which could start by the end of the year. […]
23 hours ago
FILE - R. Kelly arrives at the Cook County Criminal Court Building, in Chicago, June 13, 2008. R&B ...
Associated Press

R. Kelly timeline: Shining star to convicted sex trafficker

R. Kelly’s musical accomplishments have been accompanied by a long history of allegations that he sexually abused women and children. Now the R&B singer could be put away behind bars for a quarter-century or more when he is sentenced Wednesday in a federal courtroom in New York City. A jury found Kelly guilty in September […]
23 hours ago
FILE - R. Kelly appears during a hearing at the Leighton Criminal Courthouse in Chicago, Sept. 17, ...
Associated Press

R&B hitmaker R. Kelly due in court for sex abuse sentencing

NEW YORK (AP) — R& B star R. Kelly faces the possibility of a quarter century or more in prison when he is sentenced Wednesday in a federal sex trafficking case in New York. A jury found Kelly, 55, guilty of racketeering and other counts last year at a trial that was seen as a […]
23 hours ago
FILE - Abortion-rights activists protest outside the Supreme Court in Washington, Saturday, June 25...
Associated Press

Clinics scramble to divert patients as states ban abortion

They call her, desperate, scared and often broke. Some are rape and domestic violence victims. Others are new mothers, still breastfeeding infants. Another pregnancy so soon, they say, is something they just can’t handle. “Heart wrenching,” said Angela Huntington, an abortion navigator for Planned Parenthood in Missouri, who is helping callers reschedule canceled abortion appointments […]
23 hours ago
A man pays his respects at the site where officials found dozens of people dead in a semitrailer co...
Associated Press

San Antonio migrant deaths lead to slow effort to ID victims

SAN ANTONIO (AP) — Victims have been found with no identification documents at all and in one case a stolen ID. Remote villages lack phone service to reach family members and determine the whereabouts of missing migrants. Fingerprint data has to be shared and matched by different governments. More than a day after the discovery […]
23 hours ago

Sponsored Articles

...
Christina O’Haver

BE FAST to spot a stroke

Every 40 seconds—that’s how often someone has a stroke in the United States. It’s the fifth leading cause of death among Americans, with someone dying of a stroke every 3.5 minutes.
...
Carla Berg, MHS, Deputy Director, Public Health Services, Arizona Department of Health Services

ADHS mobile program brings COVID-19 vaccines and boosters to Arizonans

The Arizona Department of Health Services and partner agencies are providing even more widespread availability by making COVID-19 vaccines available in neighborhoods through trusted community partners.
...
Canvas Annuity

The secret to guaranteed retirement income

Annuities aren’t really a secret, but they are so misunderstood that they might as well be. Once you understand what an annuity is and how it can benefit you, you could decide this “secret” is the perfect supplement to your retirement plan.
Lower oil prices ease load on consumers and Obama