Silver lining? Gas prices may head downward with bond-rating downgrade

As the financial and commodity markets continue to reel and roil from Standard & Poor’s downgrade of the government’s long-term sovereign credit rating, there may be a silver lining for financially beleaguered consumers, some energy analysts are predicting. Crude oil futures fell to their lowest level in eight months, dropping nearly five percent in early electronic trading on the New York Mercantile Exchange (NYMEX). That could translate into lower pump prices for motorists in the immediate future, observes AAA Mid-Atlantic.

While many shareholders are losing their shirts, investors are losing their portfolio at the opening bell on Wall Street, and workers are worrying about another big hit to their 401(k) savings nest egg, motorists are keeping an eye on the pumps in hopes of catching a break. Retail gasoline prices could drop to $3-$3.25 a gallon in some suburbs and rural areas, according to a leading oil analyst for the Oil Price Information Services (OPIS), which provides daily fuel price data to AAA.

“Crude oil prices have dropped more than $30 a barrel since May, and many consumers are wondering why we aren’t already paying much less for gasoline in the wake of the wide price swing,” noted Martha Mitchell Meade, AAA Mid-Atlantic’s Manager of Public and Government Affairs. “That’s the big question, of course. Gasoline prices, which normally peak in the spring, are still too high this late in the summer driving season.”

As a rule of thumb, a one dollar drop in the price of crude oil will manifest itself into a 2.5 cent drop in the cost of a gallon of gasoline, and vice versa, explains AAA Mid-Atlantic. Similarly, a ten dollar decline in crude prices represents a saving of 25 cents per gallon for consumers.

Normally, gasoline prices tend to track crude oil prices. However, there is often a lag between a drop in crude oil prices and a decline in retail gasoline prices. That reality is reflected at self-serve kiosks across the country. Gasoline prices are perched at $3.65, according to today’s AAA Daily Fuel Gauge Report. Motorists find themselves still paying nearly ninety cents more for a gallon of regular-grade gasoline than they were at this time last year.