California dreaming? Under $4-a-gallon gas could rev up state economy.
It may be hard to believe, and it was a long time coming, but gas in California fell below $4 a gallon after three weeks of steep declines. Good news for the economy at last.
The average price of a gallon of gas has fallen below theÂ $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 aÂ bright spot for many in a state that seems to be getting nothing but bad economic news recently.
âThis is good news for consumers and good news for the state,â saysÂ H.D. Palmer,Â chief spokesman for theÂ California State Department of Finance.Â âThis means more money in the pockets of consumers, moreÂ money spent on clothing and other retail items, which means more sales taxes for the state.â
The lower gas prices also bring the state added revenue in other ways. California does not have sales tax on gasoline, but hasÂ an excise tax that is measured in the number of gallons sold, points out Mr. Palmer.
âThis means that the more gas people buy because itâs cheaper, the more that excise tax will bring in,â he says. Of course, higher pricesÂ usually dampen the volume of purchases, he adds.
Palmer is quick to point out that any boon to state coffers generated by consumer spending wonât necessarilyÂ translate immediately into restored jobs for teachers or other public employees. âThis will fill pocketbooks and gas tanks,â he says,Â but adds that how and where it will impact state expenditures is less direct.
For many consumers, however, the impact is immediate.
âNow I can breathe easy again,â 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.
âYeah, we cut back on everything from food to movies,â he says, adding that his truck only gets about 18 miles per gallon. âAll this driving was really socking it to my pocketbook.â
Most experts expectÂ prices to trend downward through at least the thirdÂ quarter of this year. According to this weekâs 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 thisÂ decline is certainly welcome news for many, the longer term trendÂ 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 CaliforniaÂ economy in connection with the Center for Energy and Environmental Economics atÂ 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,Â which led many toÂ downplay their impact on consumers.
However, as gas prices began to spike leading up to the housing crisis,Â higherÂ energy costsÂ became an often overlooked âlast straw,â and triggered a number ofÂ bankruptcies and foreclosures, saysÂ Professor Zilberman.
âThey are an important part of the cost of living,â he says. âWhen you raiseÂ gas prices, itâs like raising taxes,â he says, adding, âonly you are paying OPEC, not the government.â