AAA: Gas prices continue decline

Prices at the pump continue to decline as the calendar turns to December.  The national average price for a gallon of regular self-serve gasoline dropped 3 cents this week to $3.40 Friday – 12 cents less expensive than one month ago and 10 cents more expensive that one year ago.

Friday’s price was once again the highest on record for the calendar day and continued the streak of daily record prices that began on August 20.  The price at the pump this Thanksgiving was the highest ever for the holiday — 11 cents higher than the previous record set last year.

The national average price at the pump peaked this summer at $3.87 on September 14.  Since that day, gas prices have fallen steadily (64 of 77 days) and are now 47 cents below the recent peak (through Friday, 11/30).  This decline was the product of the changeover to winter-blend fuel, which is less expensive to produce; cheaper crude oil prices; lower demand; and economic concerns.   Prices fell rapidly in October, but declined at a much slower pace in November due to regional disruptions to distribution in the aftermath of Hurricane Sandy, higher crude oil prices, and bullish U.S. economic news.

Crude oil started the week with a three session losing streak, down 2 percent, yet rebounded Thursday as optimism grew over a potential resolution to the so-called “fiscal cliff,” the prospect of which could greatly impact any economic recovery in the U.S. come January.  A stronger economy would be expected to demand more gasoline, which puts upward pressure on prices.  Also supporting prices was stronger economic growth, up 2.7 percent, in the third quarter compared to the 2.0 percent estimate previously reported.  Crude oil has also been reacting to “chatter” that the U.S. may intervene more in Syria to help oust President Bashar al-Assad from power.  As is most often the case, tension in the Middle East and North Africa could send crude oil prices up due to the risk of supply interruptions in the oil-rich region.  Crude oil closed the week at $88.91 per barrel Friday, breaking through the 50-day moving average of $88.63 a barrel and bringing prices up 3.1 percent for the month.

In its weekly report, the U.S. Energy Information Administration (EIA) data suggested the tightness in overall gasoline inventory is easing and demand destruction is still very much in evidence.  Crude oil stockpiles declined 347,000 barrels, compared to a forecasted rise of 500,000 barrels, to 374.1 million barrels.  Crude stocks now are 39.4 million barrels above last year, down from a surplus of 43.7 million barrels reported in the prior week, which was the biggest in three years.  Gasoline stocks grew by 3.865 million barrels to 204.25 million barrels.  More compelling perhaps was news that gasoline demand plunged some 471,000 barrels per day (bpd) to 8.427 million bpd, the lowest level since Nov. 2 and 342,000 barrels a day below the year-earlier level.

“Gas prices continue to fall into December, a trend that began over two months ago,” said Martha M. Meade, Manager of Public and Government Affairs for AAA Mid-Atlantic.  “With regional gas station outages from superstorm Sandy now resolved and somewhat eased tension in the Middle East, experts believe the national average gas price will continue to decline through year’s end and into the new year.”

Gas prices in 2012 have been consistently high and despite the fact that the U.S. gas price average peaked at $3.94 per gallon in back in April, motorists are on pace to spend more this year to fill their tanks than ever before.  Prices at the pump never reached the highs seen in 2008, when the all-time record of $4.11 per gallon was set and the 2012 average did not surpass the 2011 average of $3.97 per gallon; however, according to AAA’s gas price partner, the Oil Price Information Service (OPIS), motorists will spend $483 billion or $1.32 billion a day on gasoline this year, breaking the old record set last year by $12 billion.  The U.S. Energy Department said earlier this year that the average price for a gallon of regular gasoline was running at about $3.64 in 2012, up from last year’s record average of $3.53.  As 2012 comes to a close there could be good news ahead for motorists — the Energy Department projects gas prices expected to average about $3.44 a gallon in 2013.