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You’ll see lower prices at the gas pump and in the grocery store thanks to a decision by President Obama and other world leaders to release 60 million barrels of oil from emergency stocks.
About half the total — 30 million barrels — will come from US reserves. Obama administration officials say they’re releasing the oil to offset disruptions in Middle East markets.
Analysts say the move will quickly be felt at the pump.
Prices will start dropping over the next seven to 10 days, and consumers could end up paying 11 to 14 cents less for a gallon of gas, said Patrick DeHaan, an analyst for the Web site Gasbuddy.com.
Prices won’t fall right away, because gas stations don’t want to immediately pass along their good fortune to customers, DeHaan said.
When prices fall just a penny or two per gallon, people buy as much as if prices dropped more steeply, DeHaan explained. So dealers profit more when they lower prices slowly.
“They simply don’t want to pass along the entire decrease at once,” he said. “This is one of the times they can make a little bit more money.”
Food prices will also drop. Over the last few years, prices for corn, bread, beef and other foodstuffs have become closely aligned with crude oil prices as more corn is converted to ethanol for automobile fuel.
Nearly 50 percent of all corn is used to make ethanol, said Bill Lapp, an Omaha-based food economist.
“Corn is used to produce feed for livestock and dairy animals. The corn crop in volume is bigger than all the other crops put together,” Lapp said. “Anything that influences the price of corn is going to influence the price of everything else.”
The cost of fuel to truck food to your store isn’t much of a consideration in the final price, Lapp said.
It’s less clear how the release will affect airfares, which remain substantially higher than last summer. Though fuel prices are down, travel demand is up, and airlines are filling seats at higher prices. A ticket that cost $250 in January costs $320 now, said Rick Seaney, of Farecompare.com.
While Obama’s move will unpinch consumers’ wallets, experts aren’t sure that opening up the reserves is a good idea.
“Gas prices have already been coming down,” said DeHaan, who believes releasing fuel from strategic reserves would have been a better idea at the beginning of the Libyan rebellion.
Federal officials have been talking lately about expanding the reserve, DeHaan said. It now holds enough to supply US energy needs for about 37 days; the release will reduce the margin to about 35½ days.
“My wallet likes it,” DeHaan said. “But I think it’s probably a bad idea.”