For the first time in almost four years, U.S. drivers are paying less than $3 a gallon at the pump.
U.S. retail gasoline prices are averaging less than $3 Friday, AAA said in a statement. The Heathrow, Florida-based motoring group will post the price on its website Saturday. That’s down from this year’s peak of $3.696 in April, and the first time the average has dipped below $3 since December 2010.
Sliding prices are seen saving the typical consumer $500 a year and are coming just in time to boost spending during the holiday shopping season, according to analysts including IHS Inc.
The bonus at the pumps represents the biggest benefit to consumers to date from a record boom in domestic oil production that has contributed to a global crude glut and helped bring down international prices.
“We’re in a new era of lower gasoline prices,” Phil Flynn, senior market analyst at Price Futures Group, said by telephone from Chicago. “I just worry about American drivers. When they pull up to the gas pumps and see $2.99 gasoline, they might have a heart attack. They’re going to think they’re in a time warp.”
U.S. benchmark West Texas Intermediate oil tumbled $14.21 a barrel in the three months ended Sept. 30, the biggest quarterly decline since 2012, and on Oct. 27 slipped below $80 to the lowest level in 28 months. North Sea Brent crude, the global benchmark, slid $17.69 a barrel in the same quarter to $94.67 and traded at $85.29 at 2:02 p.m. New York time.
Prices have fallen with U.S. oil output at the highest level since 1983 and the Organization of Petroleum Exporting Countries producing the most in more than a year. At the same time, the Paris-based International Energy Agency lowered its estimate for global demand growth for this year and next in an Oct. 14 report.
“For every penny that the national average falls, more than one billion dollars per year in additional consumer spending is estimated to be freed up,” Michael Green, an AAA spokesman in Washington, said on the group’s website Oct. 20.
The biggest declines have been on the U.S. West Coast. California, which typically has the highest retail prices in the continental U.S., now has cheaper fuel on average than New York, said Patrick DeHaan, a Chicago-based senior petroleum analyst for GasBuddy Organization Inc.
“The West Coast is usually not invited to the party that we are in the rest of the country,” DeHaan said. “But they’re joining in on this one.”
U.S. refiners are increasing fuel production to take advantage of cheaper crude costs. The nation’s plants processed 15.1 million barrels a day of crude in the week ended Oct. 24, the most for this time of year since 2006, Energy Information Administration data show.
Drillers are using a combination of horizontal drilling and hydraulic fracturing to pull previously inaccessible oil out of shale formations from Texas to North Dakota. The surge in production will propel domestic output next year to the highest level since 1970, EIA forecasts show.
The drop in energy prices means about $500 to $600 in additional disposable income for the U.S. consumer, Chris G. Christopher, U.S. economist at IHS, said by telephone Oct. 15 from Lexington, Massachusetts. With the help of extra money in shoppers’ pockets, holiday retail sales are expected to rise 4.2 percent this year, he said.
“‘When gasoline prices fall and everything else stays the same, confidence goes up,’’ Christopher said. ‘‘It’s just perfect when you get into November because that’s when people go out and buy presents for people and buy presents for themselves.”
Prices at the pump could keep falling into the $2.80s at current oil prices, and could see even larger declines if crude takes another tumble, DeHaan said.
The average price is already below $3 a gallon in 22 states, including Texas, Florida and New Jersey, according to data on AAA’s website. New York has the highest prices in the continental U.S. at $3.373 a gallon, followed by California at $3.333.
“Consumers are experiencing ‘sticker delight’ as gas prices unexpectedly drop below $3 in much of the country,” said Bob Darbelnet, AAA’s chief executive officer. “Lower gas prices are a boon to the economy just in time for holiday travel and shopping.”
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