Lower oil prices ease load on consumers and Obama

JONATHAN FAHEY and PAUL WISEMAN, AP Business Writers

Thursday, May 17, 2012

NEW YORK (AP) — What only weeks ago was seen as a serious threat to the economic recovery could now turn into a stimulus everyone can love.

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, which 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.

More like this story

RobHunterJohnson 1 year ago

Karl Rove the ultra riches venue for their lies. (American crossroads) Rob

gofish 1 year ago

Karl Rove of Halliburton fame is an evil, dishonest man. The fact that you think this "evildoer" is wise speaks volumes about your values. His iies and propaganda machine that instigated the Iraq war killed thousands of men and maimed 10's of thousands of American citizens.

spelchek 1 year ago

"His iies [sic] and propaganda machine that instigated the Iraq war" -- Have to disagree. If what you say is true, he would have needed a catalyst to use his so called "propaganda machine" to start a war...say...9/11. This atrocity happened, and both party's voted to go to war. The only thing KR instigated was Bush's presidency. At least he didn't use his "propaganda machine" like Axelrod uses his to pit Americans against each other.

dokeus6 1 year ago

Yea, but she has common sense.

spelchek 1 year ago

Why is it helping Obama? The AP and MSM already told us the President has no control over gas prices, or did you already forget that.

JCLifer 1 year ago

How about lower gasoline prices in Jefferson City like Columbia and the Lake?

herewego 1 year ago

Gas prices in JC won't go down till all the crooks and lobbyist leave town in a week or so.. too much profit to be made from folks on an expense account. Gas was 3.35 at the lake last weekend, 3.45 in JC, go figure... and just think, we voters elected the crooks.. I, for one, can't wait till this November so I can help elect a new bunch of crooks, at least then we can complain about some new faces...

dokeus6 1 year ago

Why are you complaining grace? Gas prices got you blue? I thought you would be all for the gas businesses around here stripping our pockets but when it affects you . Heaven forbid.

JCLifer 1 year ago

If the city "leaders" and Chamber could somehow work to get our gasoline prices more competitive, that would also help free up some disposable income for local residents to spend on other things. Cheaper gasoline prices might also encourage tourists to stop in Jefferson City and spend some money here instead of holding on to get through our town to where it is cheaper. If they stop, they might buy lunch, or visit some of the stores uptown, or they might even go admire the statues down by the capitol building.

However, greedy local gas retailers crank their prices up to ream the local residnts and also keep tourists from stopping in our town. Small minded thinking and greed are some of the reasons this town will never grow or succeed. It is all about ATTITUDE and MORALS.

RobHunterJohnson 1 year ago

They have an agenda! Grace, open your eyes. Rob

JCLifer 1 year ago

Jefferson City is 14 cents a gallon higher than Sedalia's $3.31 a gallon.

RobHunterJohnson 1 year ago

Grace did you not comment first with Karl Rove, and There is collusion on the 3 oil families in Jefferson city, how else could the price be different in Columbia or the lake. It comes from the same tap? Why does someone not look into this? Everyone comments on it but it fails to draw anyone of authority to take a look. Rob

Littleinvestor 1 year ago

Actually Rob, it does not come from the same tap. Not all comes from the pipeline head in Columbia. Some of the lake-area gas, diesel and propane come from Belle and some comes from as far away as a refinery in Ill. It is odd there is such a great difference in price, but there are different major suppliers involved in various areas.

RobHunterJohnson 1 year ago

I sure see a lot of Midland tank trucks loading at Columbia. Everyday. Rob

JCLifer 1 year ago

Kind of like the truck that was followed unloading at a cheap station on Ashland and the unloaded at the same brand, but higher price in Jefferson City - the SAME truck!

evenkeel 1 year ago

No way does Obama's re-election prospects improve until he backs up this claim:

"This was the moment when the rise of the oceans began to slow and our planet began to heal". June 4, 2008 Barack Obama

For gosh sakes, it has been nearly 4 years since this braggadocious claim from the ONE and more than 3 years since becoming president. I have been more than patient. I'm going to hold him accountable. How about you?

I have about 5 TRILLION more reasons to not want Obama re-elected. Can you guess what they are? ($5,000,000.000.000.00)

evenkeel 1 year ago

I do get a chuckle out of reading these comments from the local "experts" why gas prices are what they are. Thanks.

Understanding the complexities of commodity pricing may be beyond the grasp of those who struggle with comparing the relative value of the price of beer 12-packs versus 6-packs. I know it is for me and I'm a pretty smart guy, though unfailingly modest.

My advice: stay in your comfort zone and when in doubt go with Miller Light 12-packs. Now I'm going to take my own advice.

JCLifer 1 year ago

It's just discretionary money taken out pf JC residents' wallets every week that could have been spent at another local merchant, that's all.

eileen10 1 year ago

get a horse

RobHunterJohnson 1 year ago

Grace the facts are I drive for a living. $50 to $200 a week in gas. To Ft. Leonard Wood, St Louis , KC , Columbia and occasionally to the Boot Heel. I do follow gas prices, I do attempt to spend my money in Jefferson City. When gas jumps I do see it. 3 families own the gas business in Good old Jefferson City, When you see the same trucks coming out of or going to Columbia, Phillips in Jefferson City, Belle ect. The price is always .10 cents higher here than anywhere else? When Coastal was at Dix and West Main why was it .04 cents lower than the big 3? Again open your eyes. Rob

sickandtired 1 year ago

Rob I have to agree with you on this one. I also travel throughout the state and have noticed how JC is always 10-20 cents higher than anybody else. Seems strange since we have a pumping station right here. The good ole boy system loves to screw things up for everybody else. This town needs a good ole boy shake up

herewego 1 year ago

Well, as I predicted, the crooks left and gas went down.... how about that! Happens every time.

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