Gas prices continued their downward trend for the third consecutive week, following Hurricane Sandy’s impact on the northeastern U.S.
The national average price for a gallon of regular self-serve gasoline dropped 8 cents in the past week to $3.50 Friday. Prices remain 28 cents below month ago prices and 7cents above year ago prices, yet remain 61 cents below the $4.11 record high set 2008. The national average price of gasoline dropped 26.2 cents a gallon (6.9 percent) in October, which was the steepest monthly decline since June.
This was the fourth monthly decline in gas prices this year, and it was the largest decline for the month of October since 2008. Also, the national average price of gas has dropped for 21 straight days, which is the longest consecutive decline since the middle of June.
Despite the steep declines in October, gas prices remain at record highs for this time of year. The national average has broken a daily record high for 74 consecutive days since Aug. 20 for a total of 188 days (61 percent) in 2012. The annual average price of gas remains the most expensive on record through the end of October. The average price of gas in 2012 is $3.65 a gallon, which compares to $3.55 a gallon in 2011 and $3.52 a gallon in 2008 through October 31.
Gasoline supply and demand in New Jersey and New York following Hurricane Sandy has made national headlines, as more than half of all gasoline service stations in the New York City area and New Jersey have been shut down. Stations are either out of fuel or don’t have power to operate pumps. In addition, pipelines and refineries have been shut down due to storm damage. More than 80 percent of stations in New Jersey were unable to sell gasoline as of Wednesday, according to the New Jersey Gasoline, Convenience, Automotive Association. Late Friday afternoon, Governor Christie signed an executive order to ration gas in 12 counties in New Jersey beginning Saturday (11/3). The “odd/even” rationing allows motorists whose license plates end in an odd number to purchase fuel on odd days and motorists whose license plates end in an even number can purchase fuel on even days. By some estimates, it could take until the end of next week to get all gas stations operating again.
Crude oil pushed slightly higher this week, supported by economic data and a drop in crude oil inventories. U.S. companies added jobs in October at the fastest pace in eight months, supportive data for fuel demand and a sign of modest improvement in the labor market. Other data on Thursday showed a sharp improvement in consumer confidence and a drop in new claims for jobless benefits. An unexpected drop in U.S. crude oil inventories also pressured prices upward by week’s end. By week’s end, a stronger U.S. dollar and concerns about demand following Hurricane Sandy pushed crude oil prices lower, despite a solid jobs report. Crude oil settled at $84.86 Friday, down nearly 2 percent on the week.
In its weekly report, the U.S. Energy Information Administration (EIA) data showed crude oil stocks dropped 2.0 million barrels to 373.081 million barrels. U.S. gasoline stock rose a little over 900,000 barrels to 199.502 million barrels. Gasoline demand increased by 351,000 barrels per day (bpd) from the previous week and was 327,000 bpd above same week last year. But some “pre-pumping” ahead of Hurricane Sandy was factored in to these figures. Next week’s gasoline demand number may flirt with 8 million bpd nationally despite the video footage of gas lines in the Middle Atlantic. Four-week average demand was nearly even with 2011 levels, and it will almost certainly be negative to 2011 in the next four weeks.
“Pump prices continued to drop, despite Hurricane Sandy slamming into the eastern seaboard earlier this week,” said Martha M. Meade, Manager of Public and Government Affairs for AAA Mid-Atlantic. “Many industry analysts predict gas prices could move higher in the short term, but the overall dynamic favors lower prices due to demand destruction and minimal damage to regional refineries. Prior to Hurricane Sandy’s arrival, gas prices towards the end of October were dropping at the fastest speeds in nearly four years. If this trend continues as expected, motorists may soon be paying even less than last year to fill up their cars, as AAA believes it is possible that gas prices could drop by 40 cents a gallon nationally between now and the end of the year.”
AAA expects that gas prices across the country will continue to drop through the end of the year, assuming a smooth restart to production following Hurricane Sandy. Hurricane Sandy should have only a limited effect on gas prices. The Northeast is a significant gasoline consumer and not a major producer, so it is expected that the decline in demand from people staying home during the storm will outweigh any disruption in gasoline production. AAA predicts the national average price of gas will be between $3.40-3.50 a gallon by Election Day and between $3.25-3.40 a gallon by Thanksgiving. Gas prices generally drop in November as demand declines and because refineries are producing less expensive winter-blend gasoline. Average gas prices dropped about 15 cents a gallon last year in November.
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