Gasoline fell on speculation demand will weaken with taxes set to rise for almost every U.S. worker after midnight if lawmakers fail to reach a budget deal.
Futures sank, reducing the gain for the year, as Congress works to avert more than $600 billion in tax increases and federal spending cuts, the so-called fiscal cliff, set to start tomorrow. Allowing those changes to take effect would cause a recession in the first half of 2013, according to the Congressional Budget Office.
“The market is looking at the fiscal cliff and thinking whatever agreement comes to pass is going to be a mini deal which doesn’t address the fundamental problems in the country,” said Andy Lipow, president of Lipow Oil Associates LLC in Houston. “If we do go off the fiscal cliff and taxes rise, people will have less money to spend, which impacts gasoline demand.”
Gasoline for January delivery fell 2.29 cents, or 0.8 percent, to $2.777 a gallon at 9:23 a.m. on the New York Mercantile Exchange. Prices are up 3.4 percent in 2012, heading for the fourth consecutive yearly gain. Volume was 53 percent below the average of the past 100 days.
The more actively traded February contract slipped 2.48 cents to $2.7337 a gallon. January gasoline and heating oil contracts will expire at the close of floor trading today.
Heating oil for January delivery fell 2.08 cents, or 0.7 percent, to $3.024 a gallon, narrowing this year’s increase to 3 percent. The more actively traded February contract slipped 2.66 cents to $2.9947 a gallon. Volume was 52 percent below average.
The average nationwide retail price for regular gasoline was unchanged at $3.292 a gallon, AAA said today on its website.
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