Gas prices dropped in many areas across the country last week as a projected 34.4 million Americans planned to travel 50 miles or more by car for the Independence Day holiday weekend. The national average price for regular unleaded gasoline dropped three cents this week to $3.48 per gallon Friday. This is 14 cents lower than month ago prices, but remains 14 cents more than year ago prices. The national average declined for 21 straight days through July 3, and 37 of the last 44 days.
In both 2011 and 2012 the national average reached a summer-low near today’s date. In 2011, prices bottomed at $3.54 per gallon on June 30. In 2012, they bottomed at $3.33 on July 2. The national average may continue to drift lower in the coming days; however, crude oil prices remain substantially higher than last year and are likely to limit the amount further that the national price will fall. Barring a decline in crude oil prices, gas prices may turn higher in July as the summer driving season ramps up, demand for gasoline increases and the hurricane season continues. The national average rose 17 cents per gallon in July 2011 and 16 cents in July 2012.
Crude oil broke through the $100 per barrel mark on Wednesday, ahead of the July Fourth trading holiday, to close at $101.24 per barrel, a 14-month high. One of the main reasons for the jump was continued concerns over Middle East unrest. Egypt’s president has been ousted and an interim president appointed. Egypt is not a large exporter of oil, but major pipelines pass through the country and the Suez Canal is critical to the transportation of oil. Domestically, the Department of Labor reported higher than expected job additions, and also revised a previous report higher, lifting its furl demand outlook and pushing crude oil prices higher. After a shortened trading week, crude oil closed at $103.22 Friday, up nearly seven percent for the week and posting its biggest weekly gain since April.
In its weekly report, the Energy Information Administration (EIA) data showed crude oil stocks saw a 10.3 million barrel drop to 383.8 million barrels, with no simple explanation, yet crude stockpiles remain at comfortable levels. Contributing to the draw was a 92.2 percent refinery utilization rate, by far the highest level of 2013. More gasoline is being produced and that will factor into summer numbers. Gasoline stockpiles fell 1.7 million barrels to 223.7 million barrels. Gasoline demand was measured at 9.294 million barrels per day (bpd), representing the first venture above 9 million bpd this year, and the highest weekly number since Aug. 10, 2012. The four-week average gasoline demand number of 8.919 million bpd is now 1,000 bpd above the same four weeks in 2012. So, most traders do not believe that participants should get used to weekly demand estimates of above 9 million bpd.
“Rising gasoline supplies have pushed average gas prices nationally below the psychologically important level of $3.50 per gallon just in time for one of the busiest travel periods of the year,” said Martha M. Meade, Manager of Public and Government Affairs for AAA Mid-Atlantic. “While such relatively small savings are probably not worth celebrating, millions of Americans traveling this weekend will be relieved to save a little extra money, although the savings may not continue for long. Looking ahead, gas prices may not drop too much further in July. Increased crude oil prices, coupled with increased summertime demand and hurricane season could result in higher pump prices for motorists.”
Gas prices over the previous two years bottomed for the summer in late June/early July, which could happen again this year if seasonal trends continue. Gas prices reached a summertime low of $3.33 per gallon on July 2, 2012 and $3.54 per gallon on June 30, 2011. The national average price of gas increased 16 cents per gallon (5.1 percent) in July 2012 and 17 cents per gallon (4.4 percent) in July 2011. The highest national average so far this year was $3.79 per gallon on Feb. 27. Average gas prices may have peaked for the year in February, but there is still potential for prices to spike later in the year, especially if hurricanes or other issues disrupt refinery production.
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