Lost in the discussion of how we solve the financial crisis and the ongoing recession is the effect that Oil prices have had in its creation. It is true that sub prime mortgages were an issue way before gas prices hit $4.50/gallon, but things didn’t start falling apart until gas prices cleared the $4.00 mark.
Now that prices are are falling its almost as if the economy is receiving a ONE BILLION dollar a day stimulus plan. That is the difference between what America was paying per day for gas when it was $4.50 and what we are paying today:
Well, the unprecedented decline in gasoline prices the past five months is actually giving regular Americans a much-needed boost to their balance sheets possibly greater than what the government is doling out to the financial services and automobile industries.
New data just released by the Oil Price Information Service reveals that we’re currently spending $1 billion a day less on gasoline than we were back in July.
Don’t expect media members to be lining up to thank the oil companies for what was reported by the Associated Press just minutes ago:
Tumbling crude prices have led to enormous declines in the price of retail gasoline. At the pump, retail gas prices fell six-tenths of a penny overnight to a new national average of $1.642 a gallon Friday, well below the year-ago average of $2.981 a gallon, according to AAA and the Oil Price Information Service.
“We’re paying about a billion dollars per day less than we were in July” for gasoline, said Tom Kloza, publisher and chief oil analyst at Oil Price Information Service. “We could probably bail out some banks and maybe even some of the auto companies with the savings.”
CNBC’s Mary Thompson broke down the numbers she received from Kloza Friday: when gasoline peeked on July 11, we were spending $1.613 billion a day to fill our tanks. The combination of lower prices and lower consumption brings that down to $611.5 million today.
And, the news might get better because wholesale gasoline is currently trading around $0.80/gallon, which means that some parts of the country could see prices at the pump approaching $1 in the next few weeks.
Of course, we shouldn’t ignore huge declines in what we’ll all pay to heat our homes this winter. Heating oil a year ago was $2.64/gallon. Now it’s $1.25, or down over 50 percent.
Maybe more important, this is down from a July peak of $4.15. And, natural gas has plummeted from $13.60 in July to $5.80 today, which means we’re all getting a HUGE cut in heating costs not only from last year, but also based on what was being forecast just five months ago.
This seems worthy of some holiday cheer, although it’s likely most media outlets won’t care until after Inauguration Day when they’ll be able to give the new president all the credit.