Gasoline dropped as U.S. legislators delayed a vote on budget issues until after Christmas, fueling concerns that the world’s largest economy will face automatic spending cuts and tax increases in January.
Futures fell as House Speaker John Boehner yielded to anti-tax resistance within his own party. House members and senators won’t vote on budget issues until after Christmas, giving them less than a week to reach an agreement to avoid the so-called fiscal cliff. The standoff overshadowed data showing bigger-than-estimated growth in personal income and durable goods orders.
“It had looked earlier in the week that they were making some substantive process,” Andrew Lebow, a senior vice president at Jefferies Bache LLC in New York, said in a phone interview. “With the Boehner ‘Plan B’ not going anywhere, and actually sending the representatives home, I think the market is now worried we are going to go over the fiscal cliff.”
Gasoline for January delivery fell 1.96 cents, or 0.7 percent, to settle at $2.7347 a gallon on the New York Mercantile Exchange. Prices climbed 2.7 percent on the week, the biggest increase since the seven days ended Nov. 9, and are heading for a 1.8 percent gain this year.
Boehner said some members of the Republican caucus refused to back his tax measure because they didn’t want to be accused of raising taxes.
It was “not the outcome I wanted, but it was the will of the House,” Boehner said. “They were dealing with the perception that someone might accuse them of raising taxes.”
U.S. consumer confidence fell in December to a five-month low as Americans grew more concerned about the possibility of higher taxes next year. The Thomson Reuters/University of Michigan consumer sentiment index decreased to 72.9, the weakest since July, from 82.7 in November.
Another report showed spending by U.S. consumers climbed in November as Americans bought gifts for the holidays and made up for shopping lost to Hurricane Sandy. Purchases increased 0.4 percent last month after a 0.1 percent drop in October that was smaller than previously estimated, Commerce Department figures showed. Incomes rebounded, increasing 0.6 percent, after being depressed in October by lost wages because of Sandy.
Volumes were below normal as the Christmas holiday on Dec. 25 approached. At 3:15 p.m. New York time, volume for gasoline was 23 percent below the average of the past 100 days. For heating oil volume was 20 percent below the average.
“It’s all fiscal cliff stuff,” Carl Larry, president of Oil Outlooks & Opinons LLC, said. “Prices fell on that at the opening, and then trading volumes dropped significantly. If you take out the first hour of the day, volume was anemic.”
January-delivery heating oil futures fell 3.51 cents, or 1.1 percent, to settle at $3.0224 a gallon on the Nymex. Prices rose 1.4 percent this week and are up 3 percent in 2012.
The average nationwide cost for regular gasoline climbed 1.3 cents to $3.232 a gallon, AAA said today on its website. That’s the first increase after 28 straight days of falling prices. Gasoline at the pump fell 1.2 percent on the week.