Can cheaper energy prices overcome consumer grumpiness to save the holiday season?
It's getting cheaper for Americans to fill their tanks and heat their homes, but analysts warn that consumers may not spend more because of it.
The national average for a gallon of regular gasoline now runs $3.31, down 13 cents in a month and lower by 28 cents from the same time a year ago, according to Triple A's Fuel Gauge Report.
Traders expect prices at the pump to decline even further, for several reasons: There will be less demand for gasoline in the fourth quarter, and refineries will shift to a cheaper, winter blend. Also, the price of underlying commodities like crude oil and Rbob gasoline are likely to move lower. West Texas Intermediate closed at $97.85 on Friday, off 11.5 percent from its 52-week high, and Rbob gas finished at $2.59, off 22 percent from its high this year.
Anthony Grisanti, president of GRZ Energy, thinks prices at the pump could go as low as $3.10. That would be a 17 percent decrease from their February high of $3.74.
Other market participants are less optimistic. "I expect pump prices for regular gasoline to be $3.15 to $3.20 per gallon, down only slightly from the current average," said Jim Iuorio, managing director of TJM Institutional Services. "It always seems like pump prices are quick to rise as gas and oil futures climb, but slow to fall in the reverse situation."
Tom Kloza, chief oil analyst with Gasbuddy.com, said the general industry formula is for every dollar price drop in crude, the price of gas comes down about two and a quarter cents. Iuorio thinks crude prices can fall to $90 by the end of the year, indicating that gasoline could come down another 18 cents.
It's not just fuel costs that are falling—heating homes this winter could be less expensive as well. Commodity prices for natural gas and heating oil have seen a sharp drop, with natgas 16 percent lower in the last six months and heating oil down 6 percent in the last two months.
Still, as energy costs come down, many are wondering if consumer spending will be up.
Kloza said it might not help as much as one might expect. "Consumers are grumpy and they're like sort of the old man, you know, that's returning a bowl of soup at the deli. They're not gonna drive more," he said. "They're not gonna take more vacations."
Consumer confidence slipped in October, according to a widely watched index from the University of Michigan. Part of the problem was the partial government shutdown, which has seemed to undermine consumer sentiment just as the holiday shopping season is about to begin.
By CNBC's Jackie DeAngelis. Follow her on Twitter @JackieDeAngelis.
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First published October 28 2013, 8:39 AM