Lower gas prices a mixed blessing

JOHN TEDESCO | San Antonio Express-News

SAN ANTONIO — The last time Tabita Apolinar filled up the gas tank of her Ford Windstar minivan, spring was turning to summer and fuel cost more than $3 per gallon.

“I haven’t filled this van up in almost five months,” said the stay-at-home mom. “It’s just too much. I can’t afford it.”

But last week, she spent $20 at a Valero station at Josephine Street and Broadway, and the money stretched a little bit further.

Gas prices had dropped to $2.88 per gallon at the station, which means Apolinar can spend less on gas and buy things she needs such as diapers and baby food.

Those extra dollars and cents are giving some financial breathing room to people like Apolinar. And they’re adding up to billions in extra cash for drivers across the country that could help stimulate the economy — at least in the short term.

Experts say one of the main causes of the price drop is the surge in domestic oil production flowing from thousands of wells in the Eagle Ford Shale near San Antonio and other oil plays. With that surge but without increased demand, the price of oil can go down. That might dampen the Texas energy boom, which affects far more than the balance sheets of oil companies.

“It’s a wonderful outcome for U.S. consumers, but it’s wreaking havoc on (oil) prices,” said Karr Ingham, who developed and maintains the Texas Petro Index for the Texas Alliance of Energy Producers. “We are one of the states where higher prices for energy are a net economic positive.”

Lower prices at the pump might also encourage drivers to buy bigger, gas-hogging trucks and SUVs at a time when local officials are trying to curb automobile pollution and reduce levels of unhealthy ground-level ozone.

“When (gas) prices go down and stay down, people are more likely to purchase a larger, less-efficient vehicle,” said Kaiba White, energy policy and outreach specialist with the Texas office of the environmental advocacy group Public Citizen. “This will still be a bad deal over the lifetime of the vehicle because gas prices won’t stay low.”

Andy Lipow, president of Houston energy consulting firm Lipow Oil Associates LLC, said gas prices are at their lowest point in four years. He predicted that they’ll continue to drop through the end of the year.

“I expect that the average in Texas will be $2.70 to $2.75 by Thanksgiving,” he said. “And I expect that it will decline to $2.70 and remain there through the end of the year.”

Though the lower prices might be a mixed blessing for the Texas economy, for San Antonio drivers who rely on their vehicles to commute to work, drive children to school and simply get around a sprawling city, right now it means more money in their pockets.

“Every little bit helps,” said San Antonio plumber Pete Lopez, who drives his personal Chevrolet Silverado pickup for his job. “I’m all over the place. Thirty to 70 miles a day, easily.”

Saving money

At the Valero Corner Store at Interstate 10 and UTSA Boulevard, vehicles lined up as drivers waited for their turn at the pump, where a gallon of unleaded was selling for $2.85 a gallon.

For Travis Reust, a strength coach at the University of Texas at San Antonio, the price was even cheaper. He paid $65 to fill his Nissan Titan with 25 gallons of high-ethanol flex fuel, which was selling for nearly $2.60 a gallon.

“I like the look of that,” Reust said. Flex fuel is usually about 20 or 30 cents cheaper than regular gas, he said, so he’s benefiting from the price drop, too. With family in Oklahoma that he visits by driving, that makes a real difference.

The story was the same at the bustling Exxon station at Bandera Road and North Loop 1604, which is a magnet for commuters such as Paula Sachse.

On a recent afternoon, she filled three quarters of the tank of her Cadillac SRX for $47. Normally, it would be about $58 in the days of higher gas prices, she said.

“As a family, it’s a big deal,” said Sachse, who lives in Boerne and has three kids who are all driving age.

She bought her SRX four years ago because it offered decent gas mileage. Now that gas prices have dipped, she mulled whether it might be time to upgrade to a bigger car.

That’s how human nature works, she said, when times are good and there’s less incentive to conserve.

“When we have rain, I’ll take a longer shower,” she said. “I think, ‘Ah, the aquifer’s doing fine.'”

That renewed interest in bigger vehicles probably won’t translate to more business for the San Antonio plant that manufactures Toyota pickups. Demand there already was high.

“We haven’t been able to meet demand in two and a half — maybe even three years,” said Mario Lozoya, director of external affairs for Toyota Motor Manufacturing Texas Inc. “Any increase of sales really doesn’t affect us because it’s just more demand we can’t meet. We’re running as much as we can and building as many vehicles as we can.”

While the savings are obvious at the gas pump, air travelers might not enjoy the same level of savings when they buy tickets.

“Airlines have been burned in the past by passing through input costs before a passenger actually travels,” said William S. Swelbar, a research engineer at the Massachusetts Institute of Technology’s International Center for Air Transportation.

“If an airline were to sell a ticket based on today’s oil price and in two months when the passenger actually travels the price of a barrel of oil has gone up by $20, the airline loses money on that ticket,” he said.

Aviation industry analyst Richard Aboulafia said consumers might see lower airfares — but there won’t be a direct correlation.

“Just because fuel comes down 20 percent doesn’t mean tickets come down 20 percent,” Aboulafia said. “There are many other costs behind airline operations. But it is good news for consumers.”

Related: Drilling has not slowed, despite dropping oil prices

Still drilling

Ingham, the developer of the Texas Petro Index, said a couple factors are coming together to create lower gas prices: the development of shale oil fields such as the Eagle Ford and a slowdown in global demand for crude oil.

“For the broad, consuming U.S. public, I don’t know if there’s appreciation on their part for the energy miracle that’s playing out before their very eyes,” he said. “The bombing campaign in Syria and Iraq was met by a yawn by the energy market. Typically, that would have spiked crude oil and gasoline prices, but it did none of that. This has added an element of stability.”

The Eagle Ford is a large field that varies in quality and productivity, but lower prices aren’t threatening to shut down drilling any time soon. But it does mean less revenue is flowing to energy producers, which means they have less money to invest in jobs and infrastructure that strengthen the economy. And drilling rigs might be sidelined if prices continue dropping.

That means fewer workers spending money in local communities, eating at restaurants and buying services, said Thomas Tunstall, research director of the Institute for Economic Development at UTSA. “So it would really be a kind of across-the-board impact.”

The market hasn’t dropped that far yet.

Keith Phillips, chief economist with the San Antonio branch of the Federal Reserve Bank of Dallas, said he didn’t think oil prices would fall enough to hurt the San Antonio region’s economy.

He said financial factors vary depending on the location of the well and its production, but generally production in some areas of the Eagle Ford might stop if oil drops to between $60 and $70 a barrel. In some hot spots, the price would be even lower.

“If oil comes down from around $100 (a barrel) to the lower $80s like it has, it’s likely not going to slow drilling very much, if any at all in the Eagle Ford,” he said. “But what it does do is provide quite a bit of a kick to consumer spending in this area. I know I feel better when I fill up the car.”

Staff Writers Lynn Brezosky, Jennifer Hiller, Neal Morton and Vicki Vaughan contributed to this report.