Cheap gas has drivers returning to the pumps, despite economic woes.
Consumers pumped 0.3% more gasoline last week than in the same period last year, according to gasoline station purchases compiled by MasterCard Advisors. That’s the first increase in gas consumption since April.
The US Energy Department confirmed this trend in a report this week showing gasoline demand up almost 1 percent last week from the previous week.
The national average price for a gallon of regular dropped to $1.68 a gallon this week from a peak of $4.11 a gallon in July, according AAA.
Nobody seems to know how long the decline in gas prices will continue. Last month, the Energy Department pegged the 2009 average price at $2.37, but just this week reduced that average retail price to $2.03 a gallon for next year.
The agency estimates that crude oil prices will average $51 a barrel—down from $63.50 estimated a month ago. Oil prices hit a low of $40.81 last Friday, but jumped to nearly $50 this week based on news that Saudi Arabia will make good on promises to cut output.
The US government’s response to a pending auto industry collapse is wreaking additional havoc to oil markets. The prospect of a prolonged recession resulting from one or more Detroit automakers going bankrupt—and thus reducing consumption—sent oil prices lower. But just today, oil climbed more than $3 from the day’s lows after the Bush administration said it may tap the $700 billion bank-rescue fund to prevent an auto-industry collapse, easing concern about a prolonged recession that will cut fuel demand.
The only certainty during these times is uncertainty. With the fate of the American auto industry up in the air, the length of the economic recession unknown, and the direction of oil markets in disarray, American consumers can only respond to the real price of gasoline at the corner gas station at this exact moment. The response apparently is to fill ‘er up while the price is low.