Drivers catch a break as gasoline prices fall

Associated Press

NEW YORK

A summer road trip may not be such a bad idea after all.

Gasoline prices are falling fast. In the past 7 weeks, the average U.S. retail prices has dropped 38 cents to $3.60 per gallon. An additional 25-cent drop is expected by mid-July.

When prices approached $4 in early May, drivers were worried that $5 gasoline was a possibility this summer. But since then, oil prices have collapsed, the result of slowing economic growth in developed countries, weaker demand for oil and gas and this week’s decision by the U.S. and other countries to release 60 million barrels of oil from strategic reserves. Economists say falling prices will benefit consumers by leaving money in their wallets and making them more inclined to spend on travel, shopping and dining.

Ron Meyers, 51, a handyman from Little Rock, Ark., was doubtful that he could afford the drive to visit family in Pennsylvania. Now, thanks to cheaper gas, the trip is on. And he plans on seeing a few more summer movies, too.

“You can go out and have a good time, and have a little money left in your pocket,” he said.

Economists say that while, for instance, a 25-cent-per-gallon drop saves the typical driver only $12.50 per month, it has a huge effect both on the economy as a whole and on the psychology of consumers.

Naveen Agarwal, who helps small businesses and car companies manage fuel costs as CEO of Pricelock, in Redwood City, Calif., said he expects drivers will travel farther distances this summer than originally planned. And they’ll spend as they go.

“They’ll be a little bit more liberal about their consumption instead of just having a barbecue in their backyard,” Agarwal said.

Instead of thinking of ways to cut back, the Dykstra family of Orange City, Iowa, now will be able to spend a little more on meals and souvenirs when they visit Chicago.

“We actually budgeted for $5 a gallon,” Mark Dykstra, 46, a supermarket assistant manager who will be travelling with his three teenage children, said earlier this week.

For the first five months of the year, gasoline prices went in one direction: up. Growing economies, especially in Asia, burned more gasoline, diesel and jet fuel. Turmoil in the Middle East and North Africa prevented oil from reaching the market and scared oil traders into bidding prices higher.

Oil peaked at $114 per barrel in April. It’s now at $91 per barrel after a 2 percent drop this week.