Pain at the pump continued to ease this week as prices dropped for the fifth consecutive week, extending a sharp decline that has eased fears that prices would be headed into record territory just in time for the summer driving season.
The national average price for regular grade gasoline dropped 7 cents this week and 21 cents since its April peak to $3.73 per gallon Friday. Prices are 19 cents lower than a month ago, 23 cents below year ago prices and 38 cents lower than the all-time record high of $4.11 per gallon set in July 2008.
Crude oil continued its decline for the first half of the week as prices fell for six straight days through Wednesday to close at $96.81 per barrel. The six-day drop is the longest for U.S. crude oil since July 2011. Many of the factors that drove crude oil up have been reversing. Tensions over Iran’s nuclear program have eased, while softening economies in the U.S. and Europe have curbed demand. At the same time, some refineries pegged for closure are coming back online, bottlenecks in the supply of crude oil are becoming unclogged and crude supplies are at the highest levels in 22 years. However, the six-day, almost 9 percent losing streak that sent crude oil down to three-month lows was snapped Thursday as crude gained 27 cents to close at $97.08. By week’s end, the commodity settled down slightly at $96.13, shedding nearly $10 for the month.
In its weekly report, the Energy Information Administration (EIA) showed the nation’s crude oil stocks rose for the seventh straight week by 3.7 million barrels to 379.5 million barrels – a level not seen since Operation Desert Shield in 1991. The all-time record for crude oil stocks occurred weeks before, when inventories flirted with 392 million barrels in late July 1990 and some analysts have not ruled out a pass within 5 million barrels of that domestic stock level this year. But crude oil markets are much more global than they were 22 years ago, so the stock build needs to be viewed in that context. Gasoline stocks dropped 2.6 million barrels to 207.1 million barrels. In terms of demand this latest report shows demand still chugging behind 2011 levels, but the gap is narrowing. The four-week average for total petroleum demand is 18.7 million barrels per day (bpd), or some 148,000 bpd behind last year.
“While gas prices remain high, pain at the pump has eased a bit over the past few weeks, which is welcome relief as the summer driving season kicks off in less than two weeks with Memorial Day weekend,” said Martha M. Meade, Manager of Public and Government Affairs for AAA Mid-Atlantic. “After many $4.00-plus gas price predictions for summer 2012, some analysts now say the worst pain at the pump is behind us for the year. OPIS chief oil analyst Tom Kloza believes prices should gradually deline this summer, estimating the national average could slip as low as $3.50 per gallon by the Fourth of July.”
The Energy Information Administration’s revised forecast for summer gas prices is encouraging news for the economy. The EIA expects the price of U.S. crude oil to average about $104 per barrel in 2012, about $2 per barrel lower than the forecast in last month’s Short-Term Energy Outlook, but $9 per barrel higher than the 2011 average price. EIA expects crude oil prices to remain relatively flat in 2013. With falling global crude oil prices over the past month, EIA has lowered the average regular gasoline retail price forecast for the current April-through-September summer driving season to $3.79 per gallon, 16 cents per gallon below the level in the previous Outlook. EIA expects regular gasoline retail prices to average $3.71 per gallon in 2012 and $3.67 per gallon in 2013, compared with $3.53 per gallon in 2011.
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