To not have gas prices nipping at your heels in an election is obviously favorable to the incumbent. —Jared Bernstein, a senior fellow Center for Budget and Policy Priorities
NEW YORK — Gasoline prices likely won't set any records this summer, thanks to a recent drop in the price of oil.
The government on Tuesday slashed its forecast for average gas prices to $3.79 per gallon for the summer driving season. That's down from an initial estimate of $3.95 and below 2008's record average of $3.80.
The Energy Information Administration's revised forecast is encouraging news for the economy. Some economists blame high pump prices for so-so consumer spending this year. They were also seen as a factor in the loss of 35,000 retail jobs in February and March.
Gasoline prices soared 20 percent from January to early April.
A few analysts warned drivers they could pay as much as $5 this summer, eclipsing the 2008 record of $4.11 per gallon.
Not anymore. The price of benchmark crude has dropped about $8 per barrel since early April. Retail gas prices have followed, falling 17 cents since reaching $3.936 on April 5.
"It's almost like a tax cut," said Jared Bernstein, a senior fellow Center for Budget and Policy Priorities. EIA's prediction means that motorists will spend about $10.7 billion less on gasoline than previously anticipated.
Last year, drivers paid an average of $3.71 per gallon from April to September, a period the government considers the peak driving season.
Gasoline will likely become less of a campaign issue. Republican presidential candidates hammered at President Obama as prices jumped this year, even though presidents have little sway over pump prices. If gasoline gets even cheaper, experts think it will likely get knocked from the top tier of campaign issues.
"To not have gas prices nipping at your heels in an election is obviously favorable to the incumbent," said Bernstein, who was formerly an economic adviser to Vice President Joe Biden.
It's still a bit of a mixed bag for the president. Part of the reason oil prices have declined during the past month is sluggishness in the U.S. economy, highlighted by a disappointing jobs report last week.
Europe helped sink oil prices as well. Some European countries are in recession and election results in France and Greece over the weekend threaten to derail the eurozone's plan for recovery.
Oil is down nearly 12 percent since peaking near $110 per barrel in February. As oil prices fall, it becomes cheaper for refineries to make gasoline and other fuels, and some of that savings eventually gets passed along in the form of cheaper pump prices.
Gasoline prices have tracked oil lower. The national average for gas is now $3.76 per gallon, according to auto club AAA, Wright Express and Oil Price Information Service. That's 20 cents cheaper than a year ago.
The EIA says that gasoline prices should average $3.71 per gallon for all of 2012, down 10 cents from April's estimate. The EIA's forecast for next year is $3.67 per gallon.
Lower gasoline prices will allow many drivers to keep a few extra dollars in their pocket every time they fill up. That could encourage more drivers to take their cars out for a spin this summer, but overall demand is expected to be lower than last year.
MasterCard SpendingPulse said Tuesday that average gasoline demand fell 6.1 percent last week in the U.S. Its analysis of credit card purchases shows that American drivers have purchased less gasoline every week for more than a year.
Economic Writer Paul Wiseman in Washington contributed to this report.
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