It's the dog days of summer, when in much of the U.S. air conditioners grind on, night and day, to keep occupants inside reasonably comfortable. The result is usually a hefty electric bill at the end of the month.
But this summer has been a pleasant surprise, weather-wise. According to the Weather Channel, 2014 so far has been the coolest year since 1993, including some unseasonably cool days in June and July, when the AC units got a break.
So consumers should be getting a break on those summer electric bills, right? Well, not entirely.
Yes, consumers may be using less electricity, but statistics from the Bureau of Labor Statistics (BLS), released last week, show consumers are paying more for it. Last year consumers paid a record 13.7 cents per killowatt hour for electricity, but in June the average rate climbed to a new record high, 14.3 cents.
According to the Washington Post's analysis of the data, consumers in New York, Connecticut, Vermont and Alaska all paid more than 17 cents per killowatt hour – the highest in the nation. In a report earlier this month the Energy Information Administration (EIA) projected consumers' electricity costs would rise by 3.1% this year, making it the biggest one-year increase since 2008.
The agency says the largest price increases are occurring in the Northeast. It predicts electricity costs will rise another 2.4% next year.
Gasoline prices, meanwhile, appear to be moving in the other direction, at least for now, giving motorists a slight break at the gasoline pump. The AAA Fuel Gauge Survey shows the national average price of self-serve regular has dropped 4 cents a gallon in the last week and 16 cents in the last month.
That might be small consolation to consumers who suffered through an unexpected price spike in May and an additional increase in June, attributed to geopolitical turmoil, that pushed the price to an average $3.67 a gallon and well over $4 in several states.
Michael Green, a spokesman for AAA, said this week that consumers are now paying the lowest average price at the pump since March 17. He notes that the price has dropped every day in July.
Supply and demand
What's behind the decline? It appears supply and demand is making more of an impact. The EIA reports American refineries have been working overtime in recent weeks, producing record volumes of motor fuel.
Refinery inputs – the amount of crude oil processed – hit a record high of 16.8 million barrels per day in each of the past two weeks, exceeding the previous record from summer 2005.
While supplies are increasing, demand is dropping. EIA says rising vehicle fuel economy standards are contributing to falling demand for gasoline.
So why isn't the price lower? U.S. exports of refined gasoline continue to rise. Monthly exports have more than doubled since 2010, ensuring that retail prices don't fall too far below present levels.
Before we start thinking that $3.50 a gallon for gas is a low price, it is worth remembering that prices are up well over 100% in the last 5 years, at a time when inflation is barely 2%. In looking back through the ConsumerAffairs archives, we found this item from April 2006, headlined “Runaway prices at the pump.”
Gasoline prices are closing in on $3 a gallon throughout the country as the national average price for regular unleaded gasoline is now $2.86 a gallon and rising. That's up 7 cents in just three days. In Wisconsin, pawn shops report brisk business as residents hock their goods to raise money for gas.
One month ago regular unleaded gasoline sold for $2.51 a gallon. One year ago, regular unleaded averaged $2.22 a gallon.
It provides a little perspective. After all, 2006 was not that long ago. If motorists were struggling to pay $2.86 for gasoline before the Great Recession, when unemployment was below 5%, you have to wonder how we're managing to pay $3.51 now.