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Fuel Prices Fall – But So Does Fuel Economy

As prices level off, buyers begin moving back into gas-thirsty models.

by on Oct.04, 2013

Fuel prices have been dipping -- but are still well above $3 a gallon in most parts of the U.S.

The price of gasoline is continuing to fall from its summer-driving-season peak — and that seems to have triggered a concurrent dip in the fuel economy of the vehicles American motorists are buying.

Fuel prices have been on a rollercoaster ride this year – though notably, Americans have now been paying at least $3 a gallon for more than 1,000 days, the first time that’s ever happened. Prices have been impacted by a range of factors, including global speculation, concerns about Mideast flare-ups, and refinery and distribution problems.

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The good news, says the AAA Fuel Gauge, is that the average price of a gallon of gasoline in the U.S. has fallen more than 40 cents, to $ 3.376 per gallon compared with $3.782 at this time last year. The price of premium gasoline and diesel fuel also have fallen. Premium gasoline has dropped by 34.9 cents per gallon while diesel has dipped slightly less — to $3.894 per gallon, compared with $4.079 cents per gallon during the same period a year ago, according to the AAA Fuel Gauge.

The year got off to a bad start, gasoline prices rising in January and February 2013, due to a variety of factors, including increases in crude prices, and planned and unplanned refinery outages.

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Gasoline prices remain the most expensive on the West Coast, averaging $3.89 per gallon in California, while the cheapest fuel can be found on the Gulf Coast, with standard unleaded currently priced around $3.16 per gallon in Texas, AAA reports.

Overall, however, gasoline prices have been in retreat as more fuel-efficient vehicles are becoming a larger part of the American car fleet and new oil discoveries in the U.S. add to available supplies, a formula that traditionally drives down prices In addition, survey also indicate that American are driving less despite the economic recovery.

Ironically, lower fuel prices could pose problems for those who want to see fuel economy numbers continue to rise.  After setting all-time records earlier in the year, mileage numbers fell in September, according to a report from the University of Michigan Transportation Research Institute.

“The average fuel-economy (window-sticker) value of new vehicles sold in the U.S. in September was 24.6 mpg. This value is down 0.3 mpg from August, likely reflecting the recent reduction in the price of gasoline,” reported senior researcher Michael Sivak.

On the positive side, mileage for the typical new vehicle has risen 4.5 mpg since October 2007, Sivak noted, with the average fuel economy of vehicles sold during the 2013 model-year at 24.7 mpg. That was also up 1.2 miles per gallon over 2012.

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But where things could trend in the months ahead remains to be seen. Whether due to declining fuel prices or improving conditions in the housing industry, pickup truck sales have been surging in recent months. Demand is also growing for other large, gas-thirsty products, with a number of new models coming to market for 2014 and 2015, including the all-new Cadillac Escalade set to be debuted in New York next week. However, manufacturers have been taking steps to improve mileage on even the biggest of the new vehicles.

Paul A. Eisenstein contributed to this report.

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