IE Business Daily Business news for the Inland Empire.
Even better, they might keep dropping. Analysts are citing a number of factors for the decline, but it’s apparently not a temporary phenomenon, according to the U.S. Department of Energy. With the Christmas season around the corner, the drop couldn’t have happened at a better time for retailers.
No, you aren’t imagining things.
The price of gas really is dropping, and it’s probably going to get even lower before it bottoms out.
By the start of November, average prices throughout the United States had fallen by $1 a gallon from their peak earlier this year, with regular gasoline selling for just under $3 per gallon.
Then, on Wednesday, in a dramatic move away from its previous forecasts, the U.S. Department of Energy predicted that the average price of a gallon of gasoline will be less than $2.94 next year.
To put that number in context, one month earlier the energy department was predicting an average cost of $3.36 a gallon for 2015. That’s a staggering 44 cents above its revised estimate.
If that prediction holds up, U.S. consumers will spend about $61 billion less on gasoline in 2015 than they will spend during 2014.
At the same time it was revising its gas price forecast downward, the energy department also cut its prediction for global oil prices for 2015, from $101 a barrel of crude oil to $83 a barrel.
As of Wednesday, gas prices had fallen for 48 consecutive days, to an average of $2.92 a gallon, its lowest rate since December 2010, according to the Automobile Club of Southern California.
Also, 2010 was the last full year that the average price of a gallon of gasoline was less than $3, the automobile club stated.
Analysts are citing a number of factors – including higher rates of production, less demand worldwide, some soft spots in the global economy – for the drop in gas prices that started about four months ago.
However, an exact reason for the sudden decline is difficult to pinpoint, according to one local economist.
“I think there are a lot of factors that are causing it,” said Jordan Levine, director of economic research with Beacon Economics in Los Angeles. “Oil production has expanded. There are a lot of things happening with oil production in the United States right now, and I think that’s probably the underlying cause.
“It’s a hard equation to figure out, but it certainly doesn’t have anything to do with lack of demand.”
Retail stores and restaurants traditionally are among the first sectors to get a boost from a drop in gas prices, along with the travel and hospital industry, Levine said.
“People who have been postponing a long commute might decide to go ahead and do it,” Levine said.
Locally, gas prices in the Inland Empire started dropping about month ago, and they’re showing no signs of reversing direction.
By late last month, gas prices in Riverside and San Bernardino counties had dropped to an average of $3.37 a gallon for unleaded, down from $3.71 a gallon one year earlier, according to the automobile club.
At the same time, the average price of a gallon of gas in California was $3.39.
By last Thursday, gasbuddy.com – which provides information on fuel prices based on data gathered from nearly 13,000 service stations in the United States and Canada – was reporting that prices had dropped to $2.94 a gallon at one station in San Bernardino and $2.89 a gallon at a station in Riverside.
Those were the lowest prices recorded in both cities, according to the website.
The drop in gas prices couldn’t have come at a better time for the retail industry, which is getting ready for a holiday shopping season, said Jackie Fernandez, a retail analyst with the Los Angeles office of Deloitte, the global accounting and financial consulting company.
“The way it looks now, lower gas prices are going to help immensely,” said Fernandez, who pointed out that the 2014 Christmas shopping season was looking good before gasoline prices started to drop because of the overall improvement in the economy. “People will have more disposable income, so they will have more to spend at Christmas.
“That’s especially true in Southern California, because people spend so much money on gas anyway. I just hope it lasts, because it bodes well for retailers if it does.”
Suzanne’s Flowers in Upland has gotten such a boost from the lower gas prices that it might be able to cut its $9.95 delivery fee, owner Norm Mathis said.
“We started to notice a change about one month ago, and it’s really been a big help,” said Mathis, who said the business makes between 40 and 50 deliveries on a typical day. “If it goes down even more, we might be able to charge what we were charging when we were paying $2.25 to $2.35 a gallon.”
Taxi cab drivers rent their cabs and pay for their own gasoline, so the drop in gas prices has been a positive development at San Bernardino Yellow Cab.
“Our drivers are happy, to say the least,” said Edik Elyasi, general manager of the company, which operates about 80 cabs in San Bernardino and Riverside counties. “The prices were getting so high some of them were having trouble staying in business.”
