When gasoline prices began to spike earlier this year, the popular opinion was that oil prices would continue to climb into the peak summer travel season.
So much for popular opinion.
Crude oil futures have taken a hit lately, delivering an 8.6% slide to speculators over the past five trading days. On Tuesday, June crude settled at a three-month low, due in part to fears about Europe’s financial crisis erupting into another economic setback and stifling global oil demand.
Obviously a sharp one-week drop isn’t the last word on where oil prices are ultimately heading, but the news is likely to be good for your pocketbook.
How Much Cheaper Are We Talking?
After five weeks of surprising declines, the U.S. Energy Information Administration is revising its forecast for average gasoline prices during the summer driving period. The EIA is now targeting an average cost of just $3.79 a gallon. The original forecast called for an average of $3.95 per gallon.
This is obviously welcome news to drivers, but it’s still worth cheering about even if you don’t have a car.
From food to clothing, how do you think merchandise makes its way to a store near you? Transportation costs are baked into the prices that you’re paying as a consumer, and lower oil prices should help.
There are also many industries celebrating the recent decline in energy prices.
Retreating gasoline prices are good for hotel chains and amusement park operators, since drivers are less likely to put off summer road trips if gasoline isn’t going through the roof.
Since jet fuel is a major component of an airline’s operating costs, airlines often have to bump rates higher as fuel costs climb. The same works in reverse, although falling prices don’t apply to those who bought their tickets earlier. Cruise lines also rely on oil, and dips in oil prices can turn a loser quarter into a profitable one.
Most consumers and companies agree that falling gas prices are good. They put more money in the wallet of the penny-pinching driver. The cheering isn’t unanimous, though.
Not Everybody’s Excited About Lower Gas Prices
ExxonMobil (XOM) — the country’s second most valuable company — benefits from the higher prices as long as drivers don’t cut back on their consumption. The same can be said for many of the energy producers.
General Motors (GM) is another company that also wouldn’t mind higher fuel costs. It would help the automaker move more of its plug-in Chevy Volt cars, which have been hard sellers in recent months. Given the fuel efficiency of most newer cars, one can argue that automakers would benefit from folks trading in their older gas guzzlers as fuel prices inch higher.
However, at the end of the day, the cheering squad for lower fuel prices is larger and louder. Over the past few weeks, the consumer’s been winning.
Longtime Motley Fool contributor Rick Munarriz does not own shares in any of the stocks in this article. Motley Fool newsletter services have recommended buying shares of General Motors and ExxonMobil.
Tagged: Chevrolet Volt, consumer spending, ConsumerSpending, Energy Information Administration, european crisis, EuropeanCrisis, ExxonMobil, Finance, gas prices fall, GasPricesFall, oil prices, OilPrices