What $2 gas means to you

By Katherine Reynolds Lewis

Falling gas prices offer a glimmer of hope amid the relentless bad news about the U.S. economy.

The nationwide average for a gallon of regular was $1.90 on Monday. Drivers in Kansas City, Mo., are enjoying what looks to be the nation's cheapest fuel at the moment, rapidly approaching $1.40 a gallon.

A $1 drop in the price of gas puts about $1,250 a year back into a typical family's wallet, said Scott Bernstein, the president of the nonprofit Center for Neighborhood Technology, and prices have fallen twice that much since their $4.11 peak in July. They're even a buck below where they were last Thanksgiving.

"It's good news for cash out of pocket," Bernstein said.

The biggest winners? Poor and middle-class households that spend a disproportionate share of their incomes on energy.

"Those are the folks who are the most stretched, and in percentage terms, they'll get the biggest benefit." said Gus Faucher, the director of macroeconomics at Moody's Economy.com.

The respite at the pump buoyed consumer confidence in November despite persistent fears about a recession and job losses. "When gas prices went up, consumers really pulled back," said Dianne Kremer, an analyst at BIGresearch, a consumer research company.

Yet half-price at the pump doesn't mean we're not still paying in many ways. The dwindling economy that is making gasoline cheap also endangers your job and income.

• Tell us: Are you driving more as gas prices drop?

"Household wealth has gone down by $11 trillion from the falling stock prices and house prices," Faucher said. "Our expectation is that will cut $275 billion off consumer spending."

And many of the businesses that raised their prices over the summer to cope with higher energy costs aren't lowering them now, just to stay afloat.

Fuel surcharges linger

Remember those pesky fuel surcharges imposed earlier this year by airlines, cruise lines, taxicabs and other transportation-heavy businesses?

The drop in fuel prices hasn't eliminated all of the extra fees.

"We are in a bit of a hangover," said Elizabeth Merida, a spokeswoman for the Air Transport Association, which represents U.S. airlines. "With the price of fuel being so high for so many months this year, the industry is not going to make a profit this year. Because fuel is our No. 1 cost and energy is such a volatile market, our situation is very tenuous."

In fact, the industry expects to lose $4 billion in 2008, after spending $20 billion more on fuel than in 2007. Every penny increase in a gallon of jet fuel translates to an additional $187 million in annual operating costs, Merida said.

Even airlines that officially eliminated fuel surcharges are folding the costs into ticket prices due to their financial difficulties, so travelers end up paying the same amount.

In late October, Royal Caribbean Cruises eliminated fuel surcharges on new bookings for 2010. But the company will determine on a quarterly basis whether to refund the fuel supplement to passengers traveling in 2009 or who booked 2010 trips before Nov. 10. Any refund, in the form of an onboard credit, will be granted based on the expected price of fuel for the coming quarter.

What goes up, comes down slowly

Even those fuel surcharges that are officially eliminated may take some time to go away.

Fuel surcharges imposed by United Parcel Service are updated the first Monday of the month, based on the price 45 days earlier, company spokeswoman Karen Cole said. So you often are paying a surcharge according to what gasoline cost two months ago.

"The last year has been unprecedented, the amount of change we've seen," said Cole, noting that the surcharge doesn't make up all of the energy costs that UPS bears. "Fuel prices for us are still up 62% year to date over last year."

Many pizza delivery outfits are still charging fees that take fuel costs into account.

At Domino's, the last major pizza delivery chain to impose delivery charges, drivers use their own cars and are reimbursed for wear and tear in addition to fuel, spokesman Tim McIntyre said via e-mail.

"Some franchisees have instituted sliding scales for reimbursing drivers, which go up and down based on fuel prices," McIntyre wrote.

Continued: Can you lock in low prices?

Falling gas prices offer a glimmer of hope amid the relentless bad news about the U.S. economy.

The nationwide average for a gallon of regular was $1.90 on Monday. Drivers in Kansas City, Mo., are enjoying what looks to be the nation's cheapest fuel at the moment, rapidly approaching $1.40 a gallon.

A $1 drop in the price of gas puts about $1,250 a year back into a typical family's wallet, said Scott Bernstein, the president of the nonprofit Center for Neighborhood Technology, and prices have fallen twice that much since their $4.11 peak in July. They're even a buck below where they were last Thanksgiving.

"It's good news for cash out of pocket," Bernstein said.

The biggest winners? Poor and middle-class households that spend a disproportionate share of their incomes on energy.

"Those are the folks who are the most stretched, and in percentage terms, they'll get the biggest benefit." said Gus Faucher, the director of macroeconomics at Moody's Economy.com.

The respite at the pump buoyed consumer confidence in November despite persistent fears about a recession and job losses. "When gas prices went up, consumers really pulled back," said Dianne Kremer, an analyst at BIGresearch, a consumer research company.

Yet half-price at the pump doesn't mean we're not still paying in many ways. The dwindling economy that is making gasoline cheap also endangers your job and income.

• Tell us: Are you driving more as gas prices drop?

"Household wealth has gone down by $11 trillion from the falling stock prices and house prices," Faucher said. "Our expectation is that will cut $275 billion off consumer spending."

And many of the businesses that raised their prices over the summer to cope with higher energy costs aren't lowering them now, just to stay afloat.

Fuel surcharges linger

Remember those pesky fuel surcharges imposed earlier this year by airlines, cruise lines, taxicabs and other transportation-heavy businesses?

The drop in fuel prices hasn't eliminated all of the extra fees.

"We are in a bit of a hangover," said Elizabeth Merida, a spokeswoman for the Air Transport Association, which represents U.S. airlines. "With the price of fuel being so high for so many months this year, the industry is not going to make a profit this year. Because fuel is our No. 1 cost and energy is such a volatile market, our situation is very tenuous."

In fact, the industry expects to lose $4 billion in 2008, after spending $20 billion more on fuel than in 2007. Every penny increase in a gallon of jet fuel translates to an additional $187 million in annual operating costs, Merida said.

Even airlines that officially eliminated fuel surcharges are folding the costs into ticket prices due to their financial difficulties, so travelers end up paying the same amount.

In late October, Royal Caribbean Cruises eliminated fuel surcharges on new bookings for 2010. But the company will determine on a quarterly basis whether to refund the fuel supplement to passengers traveling in 2009 or who booked 2010 trips before Nov. 10. Any refund, in the form of an onboard credit, will be granted based on the expected price of fuel for the coming quarter.

What goes up, comes down slowly

Even those fuel surcharges that are officially eliminated may take some time to go away.

Fuel surcharges imposed by United Parcel Service are updated the first Monday of the month, based on the price 45 days earlier, company spokeswoman Karen Cole said. So you often are paying a surcharge according to what gasoline cost two months ago.

"The last year has been unprecedented, the amount of change we've seen," said Cole, noting that the surcharge doesn't make up all of the energy costs that UPS bears. "Fuel prices for us are still up 62% year to date over last year."

Many pizza delivery outfits are still charging fees that take fuel costs into account.

At Domino's, the last major pizza delivery chain to impose delivery charges, drivers use their own cars and are reimbursed for wear and tear in addition to fuel, spokesman Tim McIntyre said via e-mail.

"Some franchisees have instituted sliding scales for reimbursing drivers, which go up and down based on fuel prices," McIntyre wrote.

Continued: Can you lock in low prices?

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