Gas to average under $3 in 2015, government says
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| In this Wednesday, Oct. 29, 2014 photo, gas station prices are posted for passing motorists in Augusta, Ga. The Energy Department's Energy Information Administration predicts in its most recent short-term energy outlook, released Wednesday, Nov. 12, 2014, that drivers will pay $2.94 per gallon on average in 2015, 45 cents lower than this year. |
NEW YORK (AP)
-- The average price of gasoline will be below $3 a gallon in 2015, the
government predicted Wednesday. If the sharply lower estimate holds
true, U.S. consumers will save $61 billion on gas compared with this
year.
In a monthly report, the Energy
Department reduced its forecast for global oil prices next year by $18 a
barrel to $83. Weakness in the global economy will crimp demand for
oil, while production in places like the U.S. keeps rising.
The
result: Drivers will pay $2.94 per gallon on average in 2015, 45 cents
lower than this year. Based on expected gasoline consumption, that's a
savings of $60.9 billion.
That may not seem
like a lot in the context of a $17.5 trillion U.S. economy, but
economists say it matters because it immediately gives consumers more
money to spend on other things. Consumer spending accounts for 70
percent of the U.S. economy.
"It would be a
reversal of the trend over the last few years where consumers can't
stretch a dollar far enough," says Tim Quinlan, an economist at Wells
Fargo.
Quinlan says the price of gasoline is
one of the three big drivers of consumer confidence, along with stock
prices and the unemployment rate. "Lately all three are moving in the
right direction," he says.
The average
gasoline price in the U.S. has fallen for 48 straight days and is at its
lowest point since December of 2010, according to AAA. That was also
the last full year when the average came in below $3 a gallon.
Drivers
are now paying $2.92 per gallon on average, AAA says. Late fall is
often when the price of gas hits its low for the year. The government is
now saying that these prices aren't just a low point, but instead will
be the norm next year.
Adam Sieminski,
administrator of the Energy Information Administration, the Energy
Department's statistical arm, attributed the lower pump prices to lower
prices for crude oil and weak fuel demand. The EIA did hedge its bet on
lower oil prices though, as it cautioned that OPEC could cut production
in order to push prices higher.
The global price of crude has fallen by $35 a barrel, or 30 percent, since late June and closed at $80.38 Wednesday.
Oil
production around the world has been strong in recent years. A boom in
the U.S. has pushed domestic production up 70 percent since 2008. At the
same time, demand for fuels is growing more slowly than expected in
Asia and Europe because of weak economic growth.
The
U.S. economy is faring relatively well, but more fuel-efficient cars
and changing driving habits are keeping domestic gasoline demand low.
The EIA expects demand to fall slightly next year despite the lower pump
prices.
The EIA also slightly lowered its
prediction for growth in U.S. oil production because lower prices will
force some drillers to cut back. Production is expected to reach 9.4
million barrels a day in 2015, down from a previous estimate of 9.5
million barrels per day. Still, that would be an increase of 4 percent
over this year and the highest domestic crude production since 1972.
