Gas Prices Take Welcome Fall
A sharp downturn in pump prices might last the winter.
by Joseph Szczesny (2005-10-31)
Gasoline prices are falling across the nation thanks to lower demand, as motorists cut back on their driving and an increase in imports of refined products puts more gasoline on the markets.
Observers are predicting that prices should decline further between now and Thanksgiving.
The average price of self-serve regular gasoline in the Los Angeles-Long Beach area is $2.829, which is 7.2 cents lower than last week, ten cents lower than last month and 39 cents higher than last year, according to the Automobile Club of Southern California's Weekend Gas Watch.
"Southern Californians have reduced their driving significantly in the past couple of months. Additionally across the nation, demand for gas is down two percent from this time last year," Auto Club spokeswoman Carol Thorp said. "Temporarily relaxed emissions standards have encouraged foreign imports of gasoline. Imports have more than made up for supply problems caused by Hurricanes Katrina and Rita," she added.
Pump prices dropped for the third consecutive week across Texas, according to AAA Texas' Weekend Gas Watch, which reported that prices dropped as much as 16 cents in only a week to an average of $2.53 for regular self-serve. "Despite these significant decreases in gasoline prices, motorists still pay an average of 55 cents a gallon more today than they did only a year ago," said Rose Rougeau, spokesperson for AAA Texas. "These are the highest gas prices ever recorded for this time of year," she added.
The national average for regular self-serve gasoline is $2.571 a gallon - 14 cents less than last week's average. Prices in the Southeast - states most affected by Katrina and Rita - have dropped to as low as $2.39 in Georgia and Alabama.
So far at least, the relatively high price of gasoline has had negligible impact on economic growth. The U.S Commerce Department estimated that the economy grew by 3.8 percent rate during the third quarter - partly because of strong sales of new motor vehicles.
The rising price of gasoline, however, is adding to the inflationary pressures that have been building in the economy in response to the rising prices of oil and transportation fuels. Transportation costs have been rising and the costs of resins used for the plastics and other materials critical to manufacturers also have been increasing rapidly. More data on inflation is due out this week in the form of new government data on personal consumption expenditures and a report from the Institute for Supply Management, which is due on Tuesday.
Meanwhile, oil companies reported record profits last week with Exxon/Mobil reporting $9.9 billion in earnings - the largest quarterly profit in U.S. history. The profits have prompted calls for a windfall profits tax among Congressional Democrats. Even Congressional Republicans have warned that oil companies are facing a backlash.
The threat of inflation triggered by the increase in oil prices, however, makes it a foregone conclusion that the Federal Reserve board will again raise interest rates when it meets this week. As part of its continuing effort to keep inflation at bay, the board is expected to raise the Fed funds rate to four percent. The rate was just one percent in mid-2004.
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Looks like the fear mongering of the left is just that; them chasing their own tails. Looks like we are importing gasoline and adding to the trade deficit. Looks like the left's desperation to get cheap gas is adding to the thing they say makes our country bad.
As I stated weeks ago, prices would fall due to reduced consumption. Looks like I was right, again.