Gas prices in the U.S. soared through early 2012, and amid forecasts anticipating $4 —or $6! — per-gallon rates, surveys indicated that Americans were scaling back summer travel plans, perhaps even looking to stay closer to home with a repeat of the staycation trend. In recent weeks, though, gas prices have dropped consistently and are expected to stay well below last year’s prices.
In late April, around the time prices at the pump had leveled off and even began declining in many parts of the country, the Energy Information Administration (EIA) announced that consumer demand for gasoline would reach an 11-year low in the U.S. this summer. At that point, the EIA forecast that a gallon of regular gasoline would average $3.95 nationally during the summer of 2012.
But earlier this week, after weeks of declining oil prices and sustained low demand, the forecast changed. The Detroit Free Press and other outlets reported that the EIA now expects gas prices to average just $3.79 this summer.
That’s slightly more than the current national average ($3.75, according to AAA’s Fuel Gauge Report) and less than what we were paying a month ago ($3.93) or a year ago ($3.96). In any event, earlier predictions of $5, or even $4, gas as the standard seem unlikely to become reality in the near future.
Lower gas prices mean more money in consumers’ pockets — money they are likely to spend in other ways and boost the economy, according to the Wall Street Journal:
Falling prices, on the other hand, provide a form of stimulus, as money that otherwise would have gone into drivers’ tanks instead flows to more productive uses. The EIA estimates that a 10-cent drop in pump prices can add roughly 0.1% to disposable household income, said Kay Smith, a senior economist at EIA.
Then again, as gas prices decrease, consumers will probably drive more, increasing demand and driving prices up again. For now, though, demand for gasoline is on a downward path, as it has been for quite some time.
A chart featured by the Atlantic demonstrates how Americans have been driving less since the onset of the Great Recession. A Reuters story, meanwhile, highlighted a recent MasterCard SpendingPulse study showing that demand for gasoline in the U.S. was down 6.1% compared with a year ago at this time. In fact, on average, Americans have been purchasing less gas for 59 weeks in a row.