Job growth is far from robust, and wages are barely keeping up with inflation. But in an otherwise struggling economy, consumers may find a reason to smile as gasoline prices seem headed to below $3 a gallon for the first time in nearly three years.
The average price of gasoline has plunged in Massachusetts and across the nation in recent weeks, driven by an equally sharp drop in crude oil prices. In Dartmouth Tuesday, cars were lined up at Bliss Express to pay a cash price of $3.09 a gallon.
“I sure hope it keeps going down,” said station owner Tony Boukheir.
Bliss Express was one of several stations in Southeastern Massachusetts that were selling gas at that price, the lowest in the state, according to GasBuddy.com, a website that tracks retail gas prices. The average price of gasoline in the state has plunged 34 cents to $3.35 a gallon since the beginning of September. It is 33 cents less than a year ago.
Many analysts expect those declines to continue. With US oil production booming, global demand moderating, and tensions in Middle East easing, some even say a period of stable, moderate gasoline prices may lie ahead.
Phil Flynn, an oil analyst with The Price Futures Group in Chicago, said vast domestic oil reserves, opened by the controversial drilling technique known as fracking, could mean a new “era of lower gasoline prices.”
“There’s a good chance we’ll see the national average get below $3 a gallon,” Flynn said. “People are starting to realize that the US is going to be a bigger oil producer than Saudi Arabia and Russia.”
The cost of crude oil accounts for 71 percent of the price of a gallon of gasoline. It, too, has plunged, falling more than 15 percent, or roughly $17 a barrel since the beginning of September to close below $94 in New York. Already, in oil patch states such as Texas and Oklahoma, motorists can find prices below $3 a gallon, according to GasBuddy.com.
Prices were not that low at the Irving station on Dorchester Avenue, but Alicia Maxwell, filling up her small sport utility vehicle at $3.23 a gallon, reveled in what she called the “amazing” drop in prices. Maxwell, 23, of Weymouth, said the declines have taken some pressure off her household budget and made it easier to visit family in Boston.
“This car right here . . . takes up so much gas,” she said, but “my sister lives here, so I’m always back and forth, and it’s nothing now.”
The drop in crude prices could also mean lower heating oil prices. Residential heating oil prices dropped about 4 cents at the end of October, and are about 19 cents cheaper than at this time last year, according the US Energy Department.
All this could be good news for consumers and the economy, which depends on their spending for more than two-thirds of economic activity. Energy prices act like a tax, economists say, and when those costs rise, they suck up money that could be spent on a variety of other goods and services.
Each 1 cent decline in gas prices puts an additional $1 billion into consumers’ pockets, according to Moody’s Analytics, a forecasting firm.
Chris Lafakis, a senior economist at Moody’s Analytics, said much of the drop in crude and gasoline prices can be attributed to the weak economy, which lowers demand. Concerns about the government shutdown and possibility of a US debt default during the recent political crisis in Washington added to that weakness.
He said he expects gas prices to rebound next year as the economy regains momentum.
“The US economy isn’t doing so hot right now and neither is the global economy,” Lafakis said, “but we think things will pick up.”
Patrick DeHaan, a petroleum analyst for GasBuddy.com, said he sees gas prices across the nation continuing to drop into mid-December, when they will bottom out, but not before shedding another 5 to 15 cents.
But there’s also a chance that crude and gas prices could continue falling, particularly if global production remains high. In the first seven months of this year, US oil production averaged 7.3 million barrels a day, up from 5 million barrels a day in 2008, according to the Energy Department.
More crude could come into the market if the Middle East stabilizes and countries such as Iran begin producing and selling more.
“We’re very close to a situation, seemingly, where we’re awash in oil,” DeHaan said.