But lower gas prices aren't boosting consumer spending, confidence
CLEVELAND -- Drivers are breathing a sigh of relief as gasoline prices plunge across the country. Gasoline below $1.50 a gallon has appeared in a few places in recent days, and the national average has dropped almost in half since July, to $2.18 a gallon, reported The New York Times.
And below-$2 gasoline is becoming common nationwide. In response to a Kraft/CSP Daily News Poll last week asking "Has regular gas dropped below $2 per gallon in your market?," more than 23% of the 271 respondents said "Yes, at most stations"; and more than 17% said "Yes, at all stations"; [image-nocss] nearly 13% said "Yes, at a few stations." And about 24.5% said "No, but close" and a little more than 22% said "No, not even close."
But even as worry about gasoline prices fades, it is being replaced by fear about the broader economy, the report said. Each 10-cent drop in gasoline prices puts $12 billion a year back in consumers' pockets. Instead of spending that cash, people are trying to save it or cut their debt. "All that money is going right into paying off my credit cards," gasoline customer Jose Martinez told the newspaper.
Moreover, the decline in gasoline prices is not translating into improved fortunes for automakers, at least not yet. Consumers said they remained wary of gas-guzzling cars on the theory that prices would rise again.
"I don't think anyone who's been paying attention for the last eight years would think that now is the time to go out and buy a Hummer," Geoff Sundstrom, spokesperson AAA, told the paper.
Lower gasoline prices have followed a rapid drop in the price of oil, to less than $59 a barrel on Thursday, from more than $145 a barrel in July. The pace of the recent drop in fuel prices is "absolutely unprecedented," Tom Kloza, publisher and chief analyst for the Oil Price Information Service, told the Times.
"People are just excited about it," Dennelle Fisher, director at the Maverik store in Wheatland, Wyo., which was selling gasoline for $1.45 a gallon on Thursday, and even giving a two-cent break on that price to people with the store's loyalty cards. "They come in and they ask how long are we going to keep it down," she told the paper.
Many experts say they believe that gasoline prices are close to bottoming out and that the national average will hover around $2 a gallon through the holidays before creeping up in the new year, said the report.
In the terrible economic climate, the gasoline price cut was not enough to bolster consumer spending in October, according to the Times, citing MasterCard SpendingPulse, a report based on MasterCard purchases and estimates of cash, check and other credit card sales. "It would be very surprising if things recovered based solely on gasoline prices," Michael McNamara, vice president of research and analysis of MasterCard Advisors, which produces SpendingPulse, told the paper.
Across the country, high prices seem to have produced lasting changes in public habits. As prices rose, many people parked their cars and took the bus or train, and that change is evidently sticking even as gasoline falls. At 22 transit systems surveyed last week by the American Public Transportation Association, ridership either stayed the same or increased over the last two months, Virginia Miller, spokesperson for the group, told the paper.
Likewise, MasterCard Advisors reports show that national gasoline demand remains down compared to previous years, though by only 3% to 4% a week, compared with the 8% or 9% drops of earlier this year.