The price of a barrel of oil dropped by $9.44 on May 5 alone, lowering the price below $100 per barrel for the first time in two months. Some analysts are saying that we may see some relief at the pump, with prices dropping to an average of $3.75 per gallon by Memorial Day, and $3.50 by mid-summer.
Currently, the price of a gallon of gas is about $4.00 per gallon nation-wide, though many areas are paying much more.
Because of rising gas prices, sales of smaller, more fuel efficient cars have risen in demand in recent months. Honda saw sales of its Fit model rise 73% in April. Ford's new Fiesta sub-compact was up for the second straight month. Chevy is seeing strong demand for its new Cruze compact car. And Hyundai, which has been heavily advertising that four of its cars achieve 40 mpg-plus in highway driving, is doing well.
Gas prices will likely still climb for a few more weeks before backing down. That's because the gasoline that has been refined and in the distribution pipelines came from oil at the higher prices.
Traditionally, as gas prices come back down from painful highs, so does demand for hybrids and other vehicles with higher fuel economy. "The big swings in demand that go with gas prices are becoming less and less severe as consumers have seen prices North of $4.00 a few times now," says Paul Appleton, a San Diego-based market research who has studied consumer behavior relative to gas prices. "There is enough information in the marketplace for consumers to know that we are probably going to revisit $4.00 and $5.00 gas again and again, so they are looking at fuel economy in the long term, not just the short term."
The price of gas at the pump seems to affect two things more than any other -- consumer confidence and the sitting president's approval ratings.
Consumer confidence dropped the week of April 23 to the lowest level in more than a month as rising fuel costs squeezed household budgets.
The Bloomberg Consumer Comfort Index decreased to minus 46.2 in the week ended May 1, the lowest level since the end of March, from minus 45.1 the prior period. As gas prices recede, though, indices like the Bloomberg Consumer Comfort report is expected to move more to the positive as consumer anxiety falls.
Rising gas prices impact consumers attitudes in an out-sized way because the experience of going to the pump once or twice a week, as compared with paying a bill once a month, is a stark reminder of how prices are rising.
As gas prices go down back to $3.50, closer to what consumers view as a tolerable level, President Obama's approval ratings will likely tick up, adding to the run-up in approval he has gotten from the killing of Osama bin Laden.
Fifty-six percent of those surveyed said they approve of Obama's performance as president, according to a Washington Post-Pew Research poll taken May 2, the day after the bin Laden capture and killing. Thirty-eight percent disapproved, and six percent weren't sure.
That's a nine-point jump from last month, when 47 percent approved and 45 percent didn't. It's the president's highest approval rating since 2009.