A sign for $2.99 a gallon gasoline is seen as vehicles wait for a traffic light to turn green at a Hot Spot convenience store on the corner of Henry and Converse Streets on Friday, June 1, 2012 in Spartanburg, S.C. Oil prices plunged as bleak reports on U.S. job growth and manufacturing heightened worries about a slowing global economy. (AP Photo/Rainier Ehrhardt)
There's some good news behind the discouraging headlines on the economy: Gas is getting cheaper. At least two states had stations selling gas for $2.99 on Friday and it could fall below $3 in more areas over the weekend.
A plunge in oil prices has knocked more than 30 cents off the price of a gallon of gas in most parts of the U.S. since early April. The national average is now $3.61. Experts predict further declines in the next few weeks.
If Americans spend less filling their tanks, they'll have more money for discretionary purchases. The downside? Lower oil and gas prices are symptoms of weakening economic conditions in the U.S. and around the globe.
On Friday, oil plunged nearly 4 percent as a bleak report on U.S. job growth heightened worries about a slowing global economy and waning oil demand. The unemployment rate rose to 8.2 percent from 8.1 percent. Sobering economic news from China and Europe also contributed to the drop.
West Texas Intermediate, the benchmark for oil in the U.S, fell $3.30, or 3.7 percent, to $83.23 per barrel, the lowest price since early October. The drop adds to a 17 percent decline in May. Brent crude, which is used to price international oil, lost $3.44, or 3.4 percent, to $98.43 per barrel, its lowest price since January 2011.
U.S. drivers should feel some relief, even if they're worried about jobs. Auto club AAA says pump prices fell nearly 5 percent in May, the largest monthly percentage drop since November. Some station owners in South Carolina on Friday even presented drivers with a gift at the start of summer driving season: $2.99 gas.
Dan Durbin, president of R.L. Jordan Oil Co., says low wholesale prices allowed at least seven of the company's Hot Spot stations in Spartanburg, S.C., to lower the price to $2.99 per gallon. South Carolina also has the lowest gas tax in the nation.
Durbin predicted that more of his stations and some competitors will lower prices once they sell off higher-priced supplies currently in their tanks.
Gas also fell below $3 in Harrisonburg, Va. It could hit $2.99 or lower in Georgia, Missouri and Oklahoma perhaps as soon as this weekend, according to Tom Kloza, chief oil analyst at Oil Price Information Service.
Gas hasn't been below $3 per gallon anywhere in at least two months.
Analyst Patrick DeHaan of the website GasBuddy.com expects prices to fall below $3 a gallon soon in Tennessee, Alabama, Mississippi, which benefit from proximity to refining hubs.
Kloza predicts that motorists will pay an average of about $3.50 per gallon or lower by Father's Day. And drivers on the West Coast should see even bigger declines than other parts of the country. Their prices had been rising because of a gas shortage.
Gas prices should stabilize in July and August, Kloza says.
It's still questionable how much lower gas prices will boost consumer confidence.
Phil Flynn, an analyst for The Price Futures Group, believes falling gas prices could give consumers a psychological boost. But that could evaporate if hiring doesn't pick up and stock markets keep swooning.
"If you don't have a job, it doesn't matter if gasoline prices are $5 or $2 a gallon," he said.
Those who can afford a new car payment will appreciate falling gas prices. Automakers reported selling 1.3 million cars and trucks in May. Auto sales remain a bright spot in the U.S. economy. Still, those sales won't reverse a decline in gas demand in the U.S. because the new models are more fuel efficient than older ones heading to the scrap heap.
Energy futures fell across the board, as did global stock markets. Heating oil fell 7.53 cents to $2.628 per gallon, gasoline futures fell 6.59 cents to $2.657 per gallon and natural gas dropped 9.6 cents to $2.326 per 1,000 cubic feet. U.S. stock markets dropped more than 2 percent and are now lower for the year.