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$4 a Gallon Gasoline May Disappear as Quickly as It Came

$4 a Gallon Gasoline May Disappear as Quickly as It Came

By Jeff Youngs, April 19, 2012
Gasoline price increases that could have threatened the U.S. auto recovery--and influenced everything from American consumer psyches to the presidential race--may already have become yesterday's news.

The great Gasoline Price Shock of 2012 was real enough. Prices skyrocketed over the last six months to nearly $4 a gallon and now are up by about $1 a gallon over the end of 2010.

But the worst specter already may have passed. Gasoline futures have dropped four days in a row, ABC News reports, falling more than 6 percent from their peak late last month. That is a harbinger of lower retail prices as the bearishness works its way through the system.

Further drops would come on top of a decline of a few pennies in the retail price over the last few weeks, down to an April 16 national average of $3.92 a gallon, according to the U.S. Energy Department.

The apparent peaking of gasoline prices comes about a month earlier than the traditional seasonal apex around Memorial Day, as Americans begin their traditional heavy-driving season with summer vacations and activities. Then prices typically ease through the summer and the rest of the year.

Gas prices have been leveling off--at least for the time being--because of diverse developments ranging from an easing of imminent tensions between Iran and the rest of the world over its nuclear program to increased hopes that key Northeastern U.S. refineries might not take the capacity hits this summer that had been feared.

The U.S. economy also continues to put out leading indicators that at best are only mixed, easing bullish sentiment that would tend to push gasoline prices up.

For the auto industry, of course, this is the kind of good news that can keep a burgeoning sales recovery on track. Despite all the collective hand-wringing in the background of their financial decisions lately, American car buyers have maintained a pretty level head throughout the last several months of gasoline price hikes.

They favor higher-mileage vehicles more and more, but it's not some kind of manic plunge toward fuel economy over all other considerations: Subcompact and compact cars in March--when the gasoline price hikes were at their worst--accounted for 24 percent of overall U.S. sales, about the same as in February.

In fact, the average car on the American road is so old, and fuel-economy improvements in new models so substantial, that there's a continual tailwind these days behind both new-car sales and the overall mileage capabilities of the U.S. vehicle fleet.

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