California dreaming? Under $4-a-gallon gas could rev up state economy.
| Los Angeles
The average price of a gallon of gas has fallen below the听$4-mark in California thanks to a 12.7-cent drop from the previous week, the third double-digit decline in as many weeks, the AAA Fuel Gauge Report says.
According to the report, a gallon of gas in California cost $3.99 Monday, marking the first time since mid-February the state has seen a below-$4-per-gallon average.
It is a听bright spot for many in a state that seems to be getting nothing but bad economic news recently.
鈥淭his is good news for consumers and good news for the state,鈥� says听H.D. Palmer,听chief spokesman for the听California State Department of Finance.听鈥淭his means more money in the pockets of consumers, more听money spent on clothing and other retail items, which means more sales taxes for the state.鈥�
The lower gas prices also bring the state added revenue in other ways. California does not have sales tax on gasoline, but has听an excise tax that is measured in the number of gallons sold, points out Mr. Palmer.
鈥淭his means that the more gas people buy because it鈥檚 cheaper, the more that excise tax will bring in,鈥� he says. Of course, higher prices听usually dampen the volume of purchases, he adds.
Palmer is quick to point out that any boon to state coffers generated by consumer spending won鈥檛 necessarily听translate immediately into restored jobs for teachers or other public employees. 鈥淭his will fill pocketbooks and gas tanks,鈥� he says,听but adds that how and where it will impact state expenditures is less direct.
For many consumers, however, the impact is immediate.
鈥淣ow I can breathe easy again,鈥� says Carlos, of Carlos and Pepe Painting, as he fills his pickup truck with regular gas at $3.89 at the corner ARCO in Sherman Oaks. He says his business depends on jobs all over Southern California, and when gas prices climbed well over $4 for a month, he was having a hard time making ends meet.
鈥淵eah, we cut back on everything from food to movies,鈥� he says, adding that his truck only gets about 18 miles per gallon. 鈥淎ll this driving was really socking it to my pocketbook.鈥�
Most experts expect听prices to trend downward through at least the third听quarter of this year. According to this week鈥檚 petroleum report from the US Energy Information Administration, national prices were on average $3.57 a gallon this past week, and regular gasoline is now expected to average $3.51 per gallon nationally in the third quarter, down from the $3.76 per gallon forecast in May.
Some observers suggest that while this听decline is certainly welcome news for many, the longer term trend听of rising prices is less rosy, with volatile energy prices becoming the norm.
While gas prices are part of a much larger picture, they are an important and growing one, says Prof. David Zilberman, co-author of a study on the connection between gas prices and the California听economy in connection with the Center for Energy and Environmental Economics at听the University of California at Berkeley.
He points out that, taking inflation into account, gas prices were stable for almost 30 years until the middle of the last decade,听which led many to听downplay their impact on consumers.
However, as gas prices began to spike leading up to the housing crisis,听higher听energy costs听became an often overlooked 鈥渓ast straw,鈥� and triggered a number of听bankruptcies and foreclosures, says听Professor Zilberman.
鈥淭hey are an important part of the cost of living,鈥� he says. 鈥淲hen you raise听gas prices, it鈥檚 like raising taxes,鈥� he says, adding, 鈥渙nly you are paying OPEC, not the government.鈥�
