U.S. gas prices drop below $2.50 a gallon, boosting year-end auto sales

The price of regular unleaded and diesel fuels are displayed on a sign as customers fuel up at a Sunoco gas station in Rockbridge, Ohio, on Wednesday. Retail gasoline prices have fallen about 24 percent this year. Photo credit: BLOOMBERG
UPDATED: 12/18/14 5:51 pm ET - adds details

U.S. drivers are paying less than $2.50 a gallon at the gasoline pump for the first time in more than five years. Retail gasoline averaged $2.477 a gallon on Wednesday, data from AAA show.

That's down from this year's peak of $3.696 in April and the first time it has dipped below $2.50 since October 2009. By New Year's Day, gasoline may be selling for $2.25 to $2.40, the lowest seasonally since 2008, AAA said.

Tumbling crude prices and rising fuel output have sent gasoline prices lower, leaving more money in the pockets of consumers. The Organization of Petroleum Exporting Countries declined to reduce its output target at a meeting last month, letting prices drop to a level that may slow U.S. output that's surged to the most in more than three decades.

U.S. refineries operated at the highest level in more than nine years earlier this month.

"Every day seems to bring a bigger gift for drivers at the gas pump," said Michael Green, an AAA spokesman. "Gas prices have fallen 84 days in a row for a total of 87 cents per gallon, which is the second-longest consecutive streak on record."

The decline in U.S. gasoline prices is helping drive continued gains in sales of new light vehicles, notably crossovers, SUVs and pickups. U.S. light-vehicles sales are on pace to reach nearly 16.4 million in 2014.

It will be the fifth consecutive year U.S. deliveries have increased.

U.S. auto sales will end the year strongly, as December sales will be 10.4 percent higher than a year ago, J.D. Power & Associates and LMC Automotive said Thursday.

U.S. auto sales will hit 17 million in 2015 for the first time since 2001, the two consultancies also said.

And they said this year's total U.S. auto sales will be 16.5 million units, up 6 percent from 2013.

“The prospects for auto sales to overachieve in 2015 are moving closer to reality as 2014 goes out on a high note,” said Jeff Schuster, senior vice president of forecasting at LMC Automotive. “Economic bliss, driven by job creation, wage growth and low gas prices may drive consumers to showrooms at a faster pace, emphasizing the notion that this recovery may not be over quite yet.”

TrueCar.com today estimated December new light-vehicle deliveries will increase as much as 11 percent, with the seasonally adjusted sales rate hitting 16.6 million, a pace not seen since before the Great Recession.

"It’s clear this year will end on a higher note," TrueCar said, citing low fuel prices, sustained economic growth and consumers’ appetite for pickups, SUVs and luxury cars and light trucks. More favorable November and December weather across most of the U.S., compared to late 2013, is also helping new-vehicle demand.

U.S. benchmark West Texas Intermediate crude futures touched $53.60 a barrel on Dec. 16, the lowest level since May 2009. The contract dropped $1.08, or 1.9 percent, to $55.39 at 12:01 p.m. on the New York Mercantile Exchange.

Brent, the international benchmark, dropped to $58.50 on Dec. 16, also the least since May 2009.

A record 98.6 million Americans will cash in on cheap fuel by traveling 50 miles or more for the holiday season, according to AAA forecasts. About 89.5 million of them, or 91 percent, will drive and 5.7 million will fly.

The average U.S. household will save about $550 on gasoline expenses next year, with average fuel spending on track to fall to the lowest level in 11 years, the Energy Information Administration said Dec. 16.

Bloomberg, Reuters and David Phillips contributed to this report.