As OPEC plans their emergency meeting on Friday over falling oil prices, consumers are rejoicing over prices at the pump.
This could be good news for the ailing auto industry, where consumers have limited themselves to more fuel efficient automobiles. With the national average gas price under 3 dollars a gallon, a consumer might reconsider that cherry red Hummer he has his eye on.
USA Today explains:
It’s the first time gas has been that cheap since February. And pump prices will likely keep falling. Based on the current wholesale price of oil, consumers can expect to pay $2.80 or lower by Halloween, says Peter Beutel, president of Cameron Hanover, an energy risk management firm. “If everything stays the same, we’ve got more coming,” he says.
That’s a big switch. Prices until recently have been running about a dollar more than a year ago. That run-up began in mid-2007, when commodities speculators began to bet big on the future price of oil as a hedge against a weak U.S. dollar and rising U.S. inflation, says Beutel.
Those bets ultimately translated into a record $4.114 a gallon at the pump, set July 17. But then consumers began driving less. And for a variety of reasons, the dollar began to gain strength against the euro, and the threat of inflation began to recede.
When the financial markets imploded in late September, U.S. drivers slammed on their collective brakes. Demand for gasoline, which had been slipping 2% to 3% each week for most of the year, sank 9.7% in the week ended Oct. 10, according to the Department of Energy. [...]
Falling gas prices could provide a quick boost for the struggling auto industry and its dealers. At $4 a gallon, consumers were “only interested in vehicles that got 30 mpg on the highway or better,” says Paul Taylor, chief economist for the National Automobile Dealers Association. As gas prices fall, “Consumers consider a wider range of vehicles.”
