NEW YORK - A sharp decline in the price of oil this month is making gasoline cheaper at a time of year when it typically gets more expensive.
Over the past three weeks, the price of oil has fallen by 9 percent to $88 a barrel. That has helped extend a slide in gasoline prices that began in late February. Nationwide, average retail prices have fallen by 28 cents per gallon, or 7 percent, since Feb. 27, to $3.52 per gallon, according to auto club AAA. Analysts say pump prices could fall another 20 cents over the next two months.
In Arkansas on Monday, the average price of a gallon of gasoline was $3.29, down from $3.49 a month ago, according to AAA.
Oil prices rose for a third straight day Monday. Benchmark oil for May gained 75 cents to settle at $88.76 on the New York Mercantile Exchange. Analysts said relatively low oil prices rekindled interest among buyers. Traders have cautiously returned to buying certain key commodities, including gold and oil, after a big selloff early last week when prices slipped 3.6 percent.
The price of oil is being driven lower by rising global supplies and lower-than-ex-pected demand in the world’s two largest economies, the United States and China. As oil and gasoline become more affordable, the economy benefits because goods become less expensive to transport and motorists have more money to spend on other things. Over the course of a year, a decline of 10 cents per gallon translates to $13 billion in savings at the pump.
Diesel and jet fuel have also gotten cheaper in recent weeks, which is good news for truckers, airlines and other energy-intensive businesses.
“It makes a big difference to my bottom line,” said Mike Mitternight, owner of a heating and air-conditioning service company in Metairie, La. He has five pickups that can burn $1,000 in gas per week when prices are near $4 a gallon. Lately he’s been paying as little as $3.19 and saving $200 a week.
In a separate price report, Lundberg Survey Inc. said the average price for gasoline at U.S. pumps fell 11.04 cents a gallon in the past two weeks to about $3.54.
The survey covers the period that ended Friday and is based on information obtained at about 2,500 filling stations by the Camarillo, Calif.-based company. The average price has fallen 25.87 cents from the peak on Feb. 22, and 37.64 cents from the price on April 20, 2012, she said.
“This two-week drop of just over 11 cents replicates just what the U.S. benchmark West Texas intermediate oil price did,” Trilby Lundberg, president of Lundberg Survey, said Monday in a telephone interview. “Crude is not the only factor, but it is overwhelmingly the main factor.”
Gasoline prices typically rise in the late winter and spring as refiners shut down parts of their plants to perform maintenance and begin making more costly blends of gasoline required by federal clean-air regulations. The trend was earlier and less dramatic this year. Pump prices only came within 15 cents of last year’s peak.
Oil production is growing quickly in the U.S. and Canada, helping increase global supplies. And some of the factors that pushed prices higherthe two previous years - political turmoil in North Africa and the Middle East and refinery disruptions in the U.S. - haven’t materialized this spring.
At the same time, demand for fuels is growing slower than expected. China, the world’s biggest oil importer, is experiencing slower-than-expected economic growth.
And much of Europe is in recession.
In the U.S., wintry weather in the Midwest and Northeast has kept more drivers off the roads this spring, analysts said.
The typical U.S. household will spend an estimated $326 on gasoline this April, the equivalent of 7.8 percent of median household income, according to Fred Rozell, an analyst at GasBuddy.com. That’s $38 less than last April, when households spent 8.8 percent of their income on gas.
“It’s the difference between going out to dinner one more time or not,” said Diane Swonk, chief economist at Mesirow Financial. “It matters.”
The U.S. government releases its initial estimate of economic output during the first three months of 2013 on Friday. Economists forecast the economy grew at an annual rate of 3.1 percent, compared with 0.4 percent in the final three months of 2012.
Philip Verleger, an economist who studies energy prices, said that many monthly household expenses are fixed, but gasoline is one of the few big expenses that varies. That means when gasoline prices rise - or fall - people notice.
“This is the equivalent of a pay raise,” he said.
Shippers and airlines are also benefiting. Fuel is by far airlines’ biggest and most volatile cost. A one-cent decline in the price of jet fuel saves the U.S. airline industry $180 million over a year, according to the industry group Airlines for America. Lower energy prices also give potential customers more money to spend on air travel.
Airlines aren’t ready to celebrate yet because the relief could prove to be shortlived, said John Heimlich, chief economist at Airlines for America. “It looks promising but we’re not countingour chickens,” he said.
Analysts are worried about the transition of power in Venezuela, a major oil exporter, after the death of President Hugo Chavez. Violence has erupted in the wake of a closely contested election, and the financial situation of the country is precarious. Analysts worry that the country’s oil production could slip.
Also, refinery maintenance in the Midwest is already affecting prices there. Drivers in Ohio, Michigan and Indiana are paying only slightly less than they did last year at this time, and pricesthere have been creeping up over the last couple of weeks.
Gasoline prices reached a high this year of $3.79 per gallon on Feb. 27. Last year’s peak was $3.94, and it came on April 6; last year’s low was $3.22 on Dec. 20. The average price for all of 2012 was $3.63 per gallon. The Energy Department forecasts the 2013 average will be $3.56.
Analysts say there are limits to how far oil and gasoline prices will fall. Countries in the developing world are still growing fast and pushing world oil demand higher, perhaps to a record this year.And if oil prices fall too far drillers will be forced to cut production to try to stem the decline.
That means Mike Mitternight, the small business owner in Louisiana, won’t likely get his wish: He’d like to see gasoline prices between $2 and $3 per gallon.
“I still think it’s high and we could bring it lower,” he said.
Information for this article was contributed by Jonathan Fahey of The Associated Press and by Mark Shenk, Mike Lee and Dan Murtaugh of Bloomberg News.
Front Section, Pages 1 on 04/23/2013