Gas prices continued their decline, yet at a much slower pace than the double-digit weekly declines seen in October. The national average price for a gallon of regular self-serve gasoline dropped to $3.43 Friday, just 3 cents lower than a week ago, yet 33 cents less expensive than one month ago.
For nearly three months the national average has been the highest on record each calendar day, however, that gap has almost disappeared. One month ago the national average exceeded the previous record for that day, also set in 2011, by more than 30 cents. Today the gap is 3 cents (year ago price was $3.40) and may fall below last year’s price before the end of the Thanksgiving holiday weekend. And if not for stubbornly high prices in states impacted by Superstorm Sandy, U.S. gasoline prices would probably be several cents lower than they were one year ago. Since a September peak of $3.87 per gallon (9/14), prices have fallen 44 cents, in the wake of lower crude oil prices, reduced demand, and economic growth concerns.
In the immediate aftermath of Sandy, power outages in New York and New Jersey left many stations unable to operate pumps, despite gasoline in their storage tanks. As power is restored to the region and distribution and resupply issues are being resolved, more and more gas stations are becoming operational. Early in the week, Governor Christie (NJ) lifted gas rationing and by week’s end, both New York and New Jersey saw gas stations return to 85 to 90 percent operational.
Crude oil prices began the week with back to back losing sessions before rebounding Wednesday due to tensions in the Middle East. Israel engaged in air strikes in the Gaza Strip, which targeted Hamas leaders in retaliation for militants firing rockets into southern Israel over the past week. Escalating conflict could affect the flow of supplies from the region (which pumps a third of the world’s oil). By Thursday, the commodity turned lower again as data showed that the euro zone had slipped into its second recession since 2009 in the third quarter, a jump in U.S. jobless claims (reflecting the impact of Sandy in the Mid-Atlantic states), lackluster corporate earnings, and the looming “fiscal cliff” brought focus back to the economy. The same day (Thursday) two rockets fired from Gaza targeted Israel’s capital of Tel Aviv for the first time in 20 years. Earlier, three Israelis were killed by a Hamas rocket. Crude oil closed the week slightly higher Friday at $86.92 per barrel.
In its weekly report, the U.S. Energy Information Administration (EIA) data showed a 1.09 million barrel build in crude oil stocks to 375.94 million barrels and a 400,000 barrel drop in gasoline stocks to 201.94 million barrels. The biggest surprise, however, came on the demand side. EIA measured a 601,000 barrel per day (bpd) increase in gasoline demand, up to 8.908-million bpd. The spike in gasoline demand, has helped propel the four-week average for gasoline to 0.7 percent growth compared to the same time last year.
“Gas prices have dropped to year-ago levels (or below) in many markets, despite scattered gas outages New Jersey and New York in the aftermath of Sandy,” said Martha M. Meade, Manager of Public and Government Affairs for AAA Mid-Atlantic. “AAA believes the national average gas price could drop below $3.40 per gallon in time for the Thanksgiving holiday, which would be welcome news for motorists ready to embark on the busiest travel holiday of the year.”
Approximately 90 percent of travelers or 39.1 million people plan to travel by automobile this Thanksgiving. This is a 0.6 percent increase over the 38.9 million people who traveled by auto last year. Air travel is expected to decrease 1.7 percent as 3.14 million holiday travelers will take to the skies. AAA estimates the national average price of gasoline will drop to between $3.25-3.40 a gallon by the holiday, similar to last year’s average of $3.32, which was the most expensive average ever on Thanksgiving. Despite the historically high prices paid by motorists this year, the national average has declined by nearly 40 cents a gallon since early October and should continue to drop through the end of the year. The national average price of gas for Thanksgiving from 2007-2011 is $2.75 a gallon.
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