AAA: Gas prices begin retreat after end of summer season
After increasing steadily from a July 2 low of $3.33 to a September peak of $3.87 per gallon, the national average price at the pump has begun to retreat. This month’s peak price was seven cents below the year-to-date peak price of $3.94 on both April 5 and 6. The national average price for a gallon of regular self-serve gasoline fell to $3.83 per gallon Friday, 4 cents lower than one week ago. This price is 11 cents more than one month ago, 26 cents more than year ago prices and 28 cents below the record high of $4.11 set in July 2008.
The shape of the crude oil market shifted dramatically this week, as prices slid from the near $100 per barrel range to the $90 range following an early-week “flash crash.” Crude oil lost several dollars in value early in the week to finish at its lowest level for the month. Much of the enthusiasm for higher prices has been washed away by the reality of high stocks and awareness that the Federal Reserve’s latest stimulus plan is an admission that economic growth is flagging. Now Japan has joined the monetary circus saying it would make available billions to ignite its economy. There is also more talk of crude being released from the Strategic Petroleum Reserve, a discussion that some sources say is moot because the government will dispose of some crude anyway because by law it is holding more than is necessary. Crude oil rebounded slightly by week’s end, to close at $92.89, down more than 6 percent on the week.
Energy Information Administration (EIA) data released this week showed a shocking U.S. crude oil stock build of 8.5 million barrels to 367.6 million barrels. Gasoline stocks fell by 1.4 million barrels to 196.3 million barrels, trailing the same time last year by almost 18 million barrels. U.S. gasoline demand saw a much smaller drop this week than the previous week, taking the four-week average back to a deficit versus the same time last year. Gasoline demand as measured by the EIA was 8.632 million barrels per day (bpd) last week, down 63,000 bpd, as the four-week average was 0.9 percent behind the same time last year. Hurricane Isaac looks like it is about to disappear from the rearview mirror as U.S. refinery utilization rates were up 5.2 percent to 88.9 percent.
“AAA continues to expect prices at the pump will trend lower heading into the last three months of the year,” said Martha M. Meade, Manager of Public and Government Affairs for AAA Mid-Atlantic. “The arrival of autumn this weekend has been met with falling temperatures and stabilizing gas prices. Less expensive winter-blended gasoline now at the pump, coupled with lower demand and lower crude oil prices, should support further price declines as we move toward the end of the year.”
Analysts believe crude oil will continue to decline over the next six to nine months, which would support lower prices at the pump. The oil market is well supplied and Saudi Arabia, Canada and the U.S. have said they will increase production. However, geopolitical tensions in the Middle East and the Eurozone financial crisis could impact crude oil in either direction depending on the developments. In addition, hurricane season remains a threat until November, therefore any storm-related refining or production interruption could lead to increased oil and gas prices.