What's Important in the Financial World (12/17/2012)

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Gasoline prices continue to fall, which could be a small counterweight to fiscal cliff effects. The national average price of a gallon of regular dropped to $3.248 yesterday, according to AAA Fuel Gauge. That is down from $3.340 a week ago, and $3.422 a month ago. That price is virtually even with the year-ago price — before gas made its run toward the $4 level. The retreat in oil prices should promise a sharper drop in gas prices well into 2013. Crude is just above $86, which is down from $95 three months ago. The only factor that might pressure oil up is an apparent recovery in the Chinese market, but no one knows whether that will be long-lived or is just a temporary bump. According to Bloomberg:

A preliminary purchasing managers’ index showed manufacturing in China expanded at a faster pace this month. Syrian fighter jets bombed a Palestinian camp in Damascus, reviving concern that unrest in the Middle East may spread to oil-producing countries.

Republican Tax Proposal

The Republicans offered a new deal on taxes, and the White House likely will reject it. The proposal seems attractive. It would levy new taxes on people who make more than $1 million a year. That is not the $250,000 President Obama wanted, but is still a concession to the “tax the rich” movement. According to Reuters:

President Barack Obama is not ready to accept a new offer from the Republican leader of the U.S. the House of Representatives to raise taxes on top earners in exchange for major cuts in entitlement programs, a source said late Saturday.

The shape and details of Boehner’s offer were uncertain Saturday night, as was the exact reason the president was prepared to reject it. The source said Obama sees the offer made on Friday by U.S. House Speaker John Boehner as a sign of progress, but simply believes it is not enough and there is much more to be worked out before Obama can reciprocate.

An Unusually Mild Winter

Another factor in energy costs that may keep oil and gas prices low is the prevalence of unusually warm weather. Daytime temperatures will not be below freezing anywhere in the United States today, with the exception of northern Minnesota. The Weather.com 30-day temperature forecast shows more than half the nation will experience higher-than-normal temperatures. Only the area around Florida is expected to be lower than normal. And the number of areas that expect record temperature averages for the entire year continues to rise. Weather.com reports:

The warmest year on record is a virtual certainty in the Lower 48 states this year as NOAA and weather.com reported earlier this month.

While that covers the nation, Climate Central has localized this story by illustrating New York City’s chance at the warmest year on record in the graphic above. Through November, the average temperature for the year in the Big Apple was tracking very close to the warmest year ever recorded in the city set in 1991, 1990 and 1998.

Douglas A. McIntyre