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Gasoline prices have fallen to a five-year low in Fort Wayne just six months after reaching record highs.
Low gas prices usually prompt consumers to spend more, but economists say the recession might mean Americans will hang on to any dollars they save at the pump.
On Tuesday, regular unleaded gasoline was selling for $1.33 a gallon at Murphy USA at Lima and Dupont roads during the day, and by 8 p.m. the price was down to $1.27. The Marathon station at the intersection advertised gas at $1.35 a gallon during the day, and by 8 p.m. the price was down to $1.28.
Many other stations Tuesday sold gas for between $1.50 and $1.60 a gallon.
The last time the average price of regular gasoline fell to less than $1.40 in the Midwest was May 2003, according to the U.S. Energy Information Service.
Less than three months ago, gas sold at most Fort Wayne stations for $4.15 a gallon after Hurricane Ike tore through the Gulf of Mexico, disrupting some production.
Cheaper gasoline probably adds more than $200 billion to households’ spendable income, said Bill Witte, co-director of the Center for Econometric Model Research at Indiana University.
In a healthy economy, that additional cash would probably mean consumer spending would rise. But that might not happen as jobless claims rise and the housing slump continues, Witte said.
“The problem is everything else is so bad that households might not spend that $200 billion,” Witte said. “Households are just generally shell-shocked.”
Still, the lower gas prices might mean reductions in consumer spending won’t be quite as bad as some predicted. But Witte doesn’t expect a lot of buyers to rush out and buy the SUVs and pickup trucks that would boost the Detroit automakers in crisis, because $4-a-gallon gasoline is still fresh in drivers’ minds.
“That was kind of traumatic for a lot of people,” he said.
The summer roller-coaster ride of 2008 fuel prices strained local governments that budget for fuel for schools buses, police cruisers and highway vehicles. Now the effect is mostly positive, said Michael Hicks, director of the Center for Business and Economic Research at Ball State University.
“If you’re a government, it’s great now, because you’ve just over-budgeted fuel costs,” Hicks said.
The federal government expects fuel costs to creep into the $2-a-gallon range again next year, according to the Energy Information Service.
But there might be more short-term relief in store before the prices bounce up again.
“This may not be the bottom,” Hicks said.
aturner@jg.netSteve Hill of The Journal Gazette contributed to this story.
