US petrol prices drop below $4

Financial Mirror (Cyprus) - - FRONT PAGE -

Fuel prices have fallen so quickly that the av­er­age price for a gal­lon of reg­u­lar is below $4 in ev­ery one of the Con­ti­nen­tal United States. This fig­ure was barely imag­in­able sev­eral months ago, when $4 per gal­lon hit Cal­i­for­nia, New York and sev­eral other states. The trend to­ward lower petrol prices has to be good for the na­tional econ­omy.

Ac­cord­ing to re­search op­er­a­tion Gas­Buddy, an av­er­age gal­lon of reg­u­lar costs $4.05 in Alaska and $4.31 in Hawaii. Alaska has a lot of oil but lit­tle re­fin­ery ca­pac­ity. Hawaii is so iso­lated in the Pa­cific that fu­eld has to be shipped there from hun­dreds of miles away.

The im­prove­ment in prices is clear from the na­tional av­er­age, which is $3.47, down from $3.63 a month ago. Cal­i­for­nia, with its pop­u­la­tion of 39 mln, got the worst of it. Prices were above $4 a gal­lon for most of the past sev­eral months. In some of its largest cities, which in­clude San Fran­cisco and Los An­ge­les, prices were higher. As a mat­ter of fact, the price is still more than $4 in San Fran­cisco now. But, through­out the state, the av­er­age has dropped to $3.90 a gal­lon.

States with large re­finer­ies, par­tic­u­larly near the Gulf Cost, have prices mov­ing to­ward $3. The price in Alabama is un­der $3.20. In Mis­sis­sippi, it has dropped below $3.23, and in Louisiana it is $3.24. The low prices are a mat­ter of the luck of lo­ca­tion. Some of these states need the break be­cause they are among the poor­est in the na­tion based on me­dian house­hold in­come

Many econ­o­mists be­lieve there is a tip­ping point at which high fuel prices hurt the econ­omy. In re­al­ity there are prob­a­bly many such points, which dif­fer sharply be­tween low in­come house­holds and those who are not likely to be hurt much by petrol prices. In lower in­come house­holds in which peo­ple have to drive long dis­tances ev­ery day, fuel prices, to­gether with food, cloth­ing and shel­ter, eat up en­tire monthly bud­gets. The peo­ple in these house­hold prob­a­bly have no dis­cre­tionary in­come, which is a large drag in a con­sumer-based econ­omy.

Prob­a­bly worse for the econ­omy is the eroded pur­chas­ing power of the mid­dle class, which is crit­i­cal to GDP im­prove­ment. For many of them, $4 gaso­line has also been an ex­treme bur­den, which has been par­tially lifted re­cently.

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