Plunging Gas Prices: Will the Trend Last?
PORTLAND, Maine - With gasoline prices in Maine dropping to near $2 a gallon - or lower in a couple of places - motorists are now paying about a third less to fuel their cars than they were a year ago.
All of this is putting more money in the pockets of Maine consumers and businesses. But, as Tom Porter reports, the trend is not likely to last.
College junior Madeline Miner fills up at a downtown Portland gas station. It costs about $19 to fill the small tank of her hatchback - providing some welcome financial relief to the social work student.
"Even a couple of months ago it was costing around $30 to fill up," she says, "which still isn't very much, but compared to $19, it's a huge change."
Tom Porter: "What are doing with the extra money?"
Madeline Miner: "Saving it, spending it on college and books and everything, yeah..."
Lower gas prices don't just mean more money in the pockets of consumers. Dana Connors, of the Maine State Chamber of Commerce, says although there's no hard evidence to support the claim, it's clear that businesses are also benefiting.
"There is more money available because transportation for most businesses today is a vital part of their activity," Connors says. "It effects the bottom line so that the more money they save in that respect, it's money in their pockets they can reinvest in other items in their business."
For example, Connors says one Maine trucking company uses a million gallons of fuel a year - which means $1 million in savings for every dollar the price of gasoline falls.
Maine municipalities are also reaping the benefits. Mike Bobinsky is director of public works for the city of Portland. He oversees the million-dollar-plus fuel budget for the city's fleet of 500 vehicles, from police cruisers to fire trucks and snow plows.
"The current budget for unleaded fuel, we budget it at $2.95 per gallon," Bobinsky says, "and on diesel, we budgeted $3.20. The market has changed dramatically."
So dramatically, in fact, that Bobinsky says the city expects to shave $200,000 off this year's fuel budget, and a further $350,000 next year, if prices stay low. "It has sigifnicant impacts on the city's bottom line if those numbers stay consistent throughout the balance of this fiscal year and into next," he says.
And that, of course, is a big "if." Fuel analyst Gregg Laskoski, from Gasbuddy.com, thinks gasoline prices could be reaching their floor soon. "We certainly expect that prices will flatten out at some point, and that could come along later this month," he says.
Gasoline tends to track oil prices, and Laskoski says OPEC's decision not to cut crude oil production in late November has brought crude to its lowest level in six years.
This decision, he says, was prompted by OPEC's wish - particularly Saudi Arabia's - to undercut North American shale oil producers and put them out of business.
Laskoski says current price levels are hurting shale producers, but they're also hurting a number of OPEC countries. "There's no doubt that Libya, Iran, Iraq are all impacted," he says. "Russia is another one that is severely impacted by the level of production that OPEC is maintaining."
Whatever happens, Laskoski says fuel prices are sure to head higher by springtime, as retailers make the federally-mandated transition to cleaner and more expensive summer-blend gasoline.