Prices at the pump continued their decline for the fourth straight week, moving to their lowest level in more than 100 days. The national average price for a gallon of regular self-serve gasoline dropped to $3.46 Friday. This price is 4 cents less expensive than one week ago and 35 cents less expensive than one month ago.
The national average has been the highest on record each calendar day since late August; however the gap between this year’s price and the previous record has nearly closed. Three weeks ago the national average exceeded the previous record for that day, also set in 2011, by more than 30 cents. By Friday that gap had narrowed to 3 cents. The national average price at the pump has now fallen for 28 consecutive days, breaking the previous streak earlier this year when prices dropped 26 days in a row from May 15 through June 11.
The only lines longer than those for the presidential election this week were those seen at some gas stations in New Jersey and New York in the week after Hurricane Sandy. Power outages and distribution issues in the wake of the storm left some delivery terminals and service stations — particularly in Northern New Jersey and New York City — without electricity and thus unable to deliver gasoline to stations and consumers. It is important for motorists to realize that this continues to be an issue of electrical supply rather than a gasoline shortage. Once power is restored, there is more than adequate gasoline supply ready to be delivered to consumers.
Crude oil prices saw up and down movement this week due to various factors. The commodity rose above $85 per barrel on Thursday as post-election volatility continued, that following a 5 percent decline on Wednesday, which followed a big jump on Tuesday. Pushing crude oil prices down mid-week were U.S. budget negotiations returning front and center following Tuesday’s election, in addition to ample supplies and weak demand. Some fear the so-called “fiscal cliff,” a $600 billion package of spending cuts and tax increases could trim the deficit, but push a fragile U.S. economy back into a recession. Weakness in the U.S. economy at a time when China is struggling to push up its growth rate and Europe is grappling with its debt crisis may derail the global economic recovery even further. But supply concerns with increasing violence in the Middle East are expected to keep prices supported. The EIA also announced that U.S. crude oil prices are expected to be almost 5 percent lower in 2013 than previously forecasted amid a sluggish economy. Crude oil prices continued to rebound Friday to close the week at $86.07.
In its weekly report, the U.S. Energy Information Administration (EIA) data showed crude oil stocks rose by 1.77 million barrels to 374.848 million barrels, in line with expectations and just 200,000 barrels shy of 375 million barrels, which would be the highest November inventory level on record. Gasoline inventories rose by 2.875 million barrels, a bit higher than expectations, to 202.378 million barrels. Gasoline demand tumbled 537,000 barrels (which was probably inflated by pre-buys ahead of Hurricane Sandy) to 8.3 million barrels per day (bpd). Along the East Coast, demand for fuels tumbled 6 percent as Sandy shuttered gas stations and kept motorists off the road. The broader view from a four-week average perspective shows gas demand virtually flat to last year.
“Despite continued gas station outages and rationing in New Jersey and New York in the aftermath of Hurricane Sandy and a snowy nor’easter storm, prices at the pump continue to decline and are quickly approaching year-ago prices in many markets,” said Martha M. Meade, Manager of Public and Government Affairs for AAA Mid-Atlantic. “This is welcome news for motorists who have been paying the highest calendar day price since August (4 months). AAA believes the national average gas price could drop between $3.25 and $3.40 per gallon in time for the Thanksgiving holiday, less than two weeks away.”
While prices in some storm affected areas have increased temporarily, ultimately the price impact of Hurricane Sandy will be due to demand destruction rather than supply destruction and pump prices will continue to decline. This demand destruction will add to the recent downward pressure on gasoline prices from already low demand, continued economic concerns, and the switch to less expensive, winter-blend gasoline. AAA continues to predict that the national average will be $3.25 to $3.40 by Thanksgiving and $3.10 to $3.30 by the end of the year.
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