Gasoline prices have largely dipped below the $4-per-gallon mark thanks to rising inventories and soft demand and should stay that way, for now, USA Today reports.
Americans spent $50 billion more on gasoline during the first half of 2011 compared to the same period in 2010, says Moody's Analytics senior economist Matthew Sweet.
Economic concerns in the U.S. and Europe plus an hopes for an end to the civil war in Libya are lowering prices, although cheaper fuel could prompt consumers to be less frugal, which would send prices back up again.
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"When gas prices broke $4, you saw a lot of consumers hunker down. It definitely took some steam out of spending,'' Sweet says.
"It works the same way on the way down. Consumers will remain cautious, but as gas prices head toward $3.50, they'll take it as a sign of relief and maybe spend a little more."
In any event, prices will still be high.
"We're still going to see fuel prices at 75 cents or so higher than last year,'' says Tom Kloza, chief analyst for the Oil Price Information Service.
Rising gasoline prices cut into consumer spending, which is the motor of the U.S. economy.
"Consumers have dipped into savings in order to make it through this challenging environment," says Michael Feroli, an economist at JPMorgan, according to Reuters.
"Just as consumers used savings to smooth through the energy price spike on the upside, any move to rebuild saving in the wake of easing gas prices could soften the lift to what otherwise should be a very stimulative development."
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