AAA: Biggest drop in gas prices in four years

The cost of gasoline dropped 7.4 percent last month, the U. S. Labor Department reported on Friday. That’s the biggest drop in almost four years, government economists say.  Just in time for Christmas, gasoline prices have dropped below three dollars in some towns  and  “at a scattering of stations” in Northern Virginia, Northwest Ohio, Northern New Jersey, Central Missouri, South Dakota and, Southeastern Minnesota. Consumers are also seeing the Christmas miracle at some filling stations in other spots on the map, such as in Chattanooga, Tennessee; Tucson, Arizona; St. Louis, Missouri; and Tampa Bay, Florida.

Consumers are beginning to see some of the lowest gas prices in six months. The last time the cost of gas fell below $3.00 a gallon on a statewide basis was six months ago, when the price of a gallon of gasoline fell to $2.98 across the state of South Carolina in late June.

Some 84.4 million Americans are wondering if the falling prices in some cities are an anomaly, or a harbinger of things to come during the upcoming holidays? By the way, that’s the number of folks who are traveling 50 miles or more from home this Christmas and at New Year’s. That – the cost of gas – will be the thought in the back of their minds, as they pack their Christmas gifts and bags into the old family car for their holiday trips.

On Friday, the national average cost of gasoline at $3.29 a gallon was eight cents less expensive than it was a week ago, and 15 cents cheaper than it was a month ago. Still, it was also three cents more expensive than it was a year ago. As 2012 draws to an end, the Energy Information Administration (EIA) expects regular-grade gasoline to average $3.63 per gallon for the year. At this pace, the average annual price of gas for 2012 will be the most expensive on record. AAA’s gas price partner, the Oil Price Information Service (OPIS), is forecasting motorists will spend $483 billion on gasoline this year. Our collective annual tab was $481 billion in 2011 when the average annual price was $3.53 a gallon. Consumers spent $389 billion on gas purchases in 2010, and we forked over $324 billion in 2009. Back in 2008, we shelled out a then all-time record amount in annual fuel costs, $448 billion. That’s enough to put you in the Christmas spirit, right?  But this may put you in the holiday mood; the EIA is forecasting the annual price for 2013 to average 20 cents a gallon lower at $3.43.

In its weekly report, the U.S. Energy Information Administration (EIA) data showed crude stockpiles increased by 800,000 barrels to 372.61 million barrels last week, well above the upper limit of the average range for this time of year. Gasoline stockpiles rose 5 million barrels to 217.12 million barrels, which is plentiful for this time of year. Gasoline demand moved higher, but the rise was just 134,000 barrels per day (bpd) and it puts demand at a very poor December level of just 8.488-million bpd.

“‘It’s beginning to look a lot like Christmas, Ev’rywhere you go,’ even at the filling station.  However, while prices are dropping, and not as quickly as most of us would like, gas costs are still high for this time of year in many parts of the country,” said Martha M. Meade, Manager of Public and Government Affairs for AAA Mid-Atlantic. “Yet the vast majority of holiday travelers, nine out of ten, are expected to travel to their year-end destinations by automobile, despite the price at the pump.”

AAA projects approximately 90 percent of travelers (84.4 million) plan to travel by automobile this holiday season. This is a 1.3 percent increase over the 83.3 million people who traveled by auto last year.

AAA estimates the national average price of gasoline will slowly drop through the end of the year and average between $3.20-3.30 a gallon by New Year’s Day. Gas prices dropped about 50 cents a gallon on average from September through early December, but remain at record highs for this time of year. Here is the upshot: consumers could have more money to spend on holiday shopping, dining and entertainment if prices drop through December as expected.