NEW YORK – A summer road trip may not be such a bad idea after all.
Gasoline prices are falling fast. In the past 7 weeks, the average U.S. retail prices has dropped 38 cents to $3.60 per gallon. Another 25-cent drop is expected by mid-July.
When prices approached $4 in early May, drivers were worried that $5 gasoline was a possibility this summer. But since then, oil prices have collapsed, the result of slowing economic growth in developed countries, weaker demand for oil and gas and this week's decision by the U.S. and other countries to release 60 million barrels of oil from strategic reserves. Economists say falling prices will benefit consumers by leaving money in their wallets, and making them feel freer to spend on travel, shopping and dining.
Ron Meyers, 51, a handyman from Little Rock, Ark., was doubtful that he could afford the drive to visit family in Pennsylvania. Now, thanks to cheaper gas, the trip is on. And he plans on seeing a few more summer movies, too.
"You can go out and have a good time, and have a little money left in your pocket," he said.
Economists say that while, for instance, a 25-cent-per-gallon drop only saves the typical driver $12.50 per month, it has a huge effect both on the economy as a whole and on the psychology of consumers.
Naveen Agarwal, who helps small businesses and car companies manage fuel costs as CEO of Pricelock, in Redwood City, Calif, said he expects drivers will travel farther distances this summer than originally planned. And they'll spend as they go.
"They'll be a little bit more liberal about their consumption instead of just having a barbeque in their back yard," Agarwal said.
Instead of thinking of ways to cut back, the Dykstra family of Orange City, Iowa, will now be able to spend a little more on meals and souvenirs when it visits Chicago.
"We actually budgeted for $5 a gallon," Mark Dykstra, 46, a supermarket assistant manager who will be travelling with his three teenage children, said earlier this week.
For the first five months of the year, gasoline prices went in one direction: up. Growing economies, especially in Asia, burned more gasoline, diesel and jet fuel. Turmoil in the Middle East and North Africa prevented oil from reaching the market and scared oil traders into bidding prices higher.
Oil peaked at $114 per barrel in April. It's now at $91 per barrel after a 2 percent drop this week.
Energy economists and Wall Street investment bankers caution that oil is likely to rise above $100 again next year, particularly if oil producers struggle to meet rising global demand. Hurricanes in the Gulf of Mexico or further unrest in the Middle East could also boost prices.
Agarwal expects gasoline prices will return to a range of $3.50 to $3.75 per gallon by the end of the year. Goldman Sachs and other investment banks predict oil will rebound next year to levels that would push gasoline above $4 for the first time since 2008.
"If you're asking whether gasoline could be $3.50 or higher forever, the answer is yes," said oil analyst Andrew Lipow. "People will have to make some adjustments."
Adzi Vokhiwa, 22, of Acworth, Ga., is relieved by the price drop, but skeptical. "It almost doesn't matter because I know (prices) are going to go back up again," she said.
She commutes 60 miles a day from her home in Acworth, Ga. to her job in downtown Atlanta. Twice a week she puts $40 worth of gasoline into her Kia Soul, and has asked her boss to change her schedule so she can carpool a couple of days a week.
High gasoline prices have made it tougher for Vokhiwa to save for graduate school. But for now, at least, she says she'll have a little more money to put towards that goal.
Randy Herring, 46, of Montpelier, Vt. had been borrowing his wife's Subaru Legacy instead of driving his Chevy Tahoe SUV and he had even contemplated pulling out his bicycle. Now he's employing a strategy to capitalize on the falling prices. He's started to give the Tahoe the equivalent of a sip of gasoline every so often so he doesn't miss out on the coming savings.
"Whatever I need for the week, and that's it," Herring said.
Associated Press Writers Michael Rubinkam in Allentown, Penn. and Barbara Rodriguez in Chicago contributed to this story.
Chris Kahn can be reached at twitter.com/ChrisKahnAP. Jonathan Fahey can be reached at twitter.com/JonathanFahey