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Thu October 24, 2013
Gas Prices At Three Year Low
The federal shutdown had economists worried, but consumers have had something to smile about.
Gasoline prices are the lowest in three years — under $3 a gallon in some places.
Analysts credit greater supplies, lower demand, the easing of Middle East tensions and even a slow hurricane season.
JEREMY HOBSON, HOST:
From NPR and WBUR Boston, I'm Jeremy Hobson. It's HERE AND NOW.
And if you've filled up your car with gas recently, you may have been pleasantly surprised. In some parts of the country, a gallon of regular unleaded is now down to less than $3 a gallon. It has been three years since most Americans have seen prices that low. NPR senior business editor Marilyn Geewax joins us now from Washington to tell us what is going on. Marilyn, welcome back.
MARILYN GEEWAX, BYLINE: Hi, Jeremy.
HOBSON: Well, what's the explanation for these low prices?
GEEWAX: Well, you know, every year at this time, we do see some seasonal drop. The refineries are switching from those more expensive summer blends to the cheaper winter blend, so that helps. And also, people just drive less. You're not going on vacation, so we start to see a drop in demand. And that helps prices. But, as you may have noticed, autumn comes every year.
GEEWAX: And so this happens all the time, but this year, it's different. Prices are about 30, 40 cents a gallon less than they were last autumn.
HOBSON: Well, yeah. We said lowest in three years. So what's different about this year?
GEEWAX: Well, part of it is - I would just describe it as dumb luck. We have had refineries working very well, because there haven't been any hurricanes. So the supplies are coming in really well. We've got lots of gas coming out of the refineries, lots of oil being pumped, thanks to fracking. And also, we've changed how we use gasoline. That is, there's been growing drop in demand. More people are driving cars that are fuel-efficient, or they're carpooling, commuting in various ways that have reduced the amount of gas that they're using. So, less demand, more supply, that's all good. But there are still other factors.
HOBSON: Yeah. Well, let's talk about those, because, obviously, one of them is people always look at what the Fed is doing and the value of the dollar and how much it costs us to import the oil that we import. But also, there are some geopolitical issues that come into play.
GEEWAX: Bingo. That's it. There are really some big things happening in the world that have helped our gasoline prices. You know, when you pull up to that neighborhood pump, you may not be thinking about all the things happening in the world. But, really, it does have an impact on us. In the Middle East, you know, Egypt, it seems to have quieted down. Syria has seems to have quieted down a bit. And so that's taken some of the risk out of: Will the Suez Canal get blocked? Or will there be problems in terms of transportation in that part of the world? So that helps.
And then there's the situation with Iran, where we're not as tense with them right now. And if we were to remove some of those sanctions on Iran, we could see them pumping a lot more oil into global markets. That would also help drive down prices. So, stability in the Middle East is really a pretty big deal. And then, of course, also, we're just fracking more. There's more and more supplies of oil. So a lot of economists are looking at the scenarios here and saying, actually, gas prices could drop a lot more. It may be very cheap come Christmas. If gasoline's below $3 a gallon, that could end up helping retailers.
HOBSON: Helping retailers and helping Americans and helping the economy, in general. What kind of an impact could these lower gas prices have on the economy, which many people say is going to have a very difficult fourth quarter because, in part, of what we've just seen in Washington?
GEEWAX: Right, exactly. That government shutdown absolutely depressed growth for the fourth quarter. But, you know, if you get a big boost from cheaper fuel, it's not just you at the pump. There are grocery stores that need things delivered by big, heavy trucks. And there are all sorts of reasons why cheaper transportation can help hold down costs at the grocery store, at, you know, for all retailers.
So if we have low inflation, more money in your wallet on Saturday when you go and stop at the pump, that all sort of helps create more positive consumer mood as we head into the holiday shopping season. So, yes, the government shutdown hurt, but maybe we're getting an upside surprise from these cheaper energy prices.
HOBSON: NPR's senior business editor, Marilyn Geewax, thanks, as always.
GEEWAX: Oh, you're welcome, Jeremy.
HOBSON: This is HERE AND NOW. Transcript provided by NPR, Copyright NPR.