Gas prices stabilized this week, and even retreated in some areas, once it was determined there would be limited impact to long-term oil production in the Gulf from Isaac.
The national average price for a gallon of regular self-serve gasoline dropped a penny on the week to $3.82 per gallon Friday. This price is 17 more than one month ago and 16 cents more than year ago prices. For more than two straight weeks, the national average price has now set a new all-time record for each calendar day. The price at the pump across the country saw a spike last week as the Gulf Coast braced for Hurricane Isaac, with more than one million barrels per day of production capacity shut down.
The shortened holiday trading week began today crude oil dropping to $92.25 per barrel. These losses came after a Friday rally on reports that Federal Reserve Chairman Ben Bernanke had not ruled out additional quantitative easing to support the economy. By week’s end oil prices had risen modestly, lifted by a drop in U.S. crude oil supplies (following Hurricane Isaac), a weakened U.S. dollar and the European Central Bank’s (ECB) new bond-buying measures to backstop financially stressed eurozone nations. Crude oil settled at $96.42 Friday, having settled within the $94 to $96 per barrel range for all but one of the past 16 sessions since mid-August. The commodity gained more than 9 percent in August.
Energy Information Administration (EIA) data released this week showed U.S. crude oil stocks fell by 7.4-million barrels to 357.1-million barrels, due to a decline of more than 7-million barrels at the Gulf Coast due to Hurricane Isaac. Gasoline stocks fell by 2.3-million barrels to 198.9 million barrels. Gasoline demand was robust, rising 113,000 barrels per day (bpd), indicating motorists were on the road for the Labor Day weekend. Now the question is how much do motorists cut back in the usually weak September to November period?
“As the summer driving season comes to an end and barring any significant disruption to oil production due to hurricane activity (which ends in November), AAA expects prices at the pump will decline during the last few months of the year as demand decreases and the switch to less expensive winter-blend gasoline begins,” said Martha M. Meade, Manager of Public and Government Affairs for AAA Mid-Atlantic. “After nearly three weeks of current day gas price records, this comes as welcome news for motorists looking for much needed relief at the pump.”
AAA expects that the national average price at the pump will decline heading toward the end of the year. Prices should drop as demand decreases with the end of the summer driving season, as refineries switch to less expensive winter-blend gasoline and as hurricane season ends. However, regional supply and distribution issues, hurricane concerns, or other unforeseen market moving events could potentially send prices higher temporarily in the coming months. Tom Kloza, chief analyst at the Oil Price Information Service (OPIS) and AAA partner, believes prices will decline during the fall months and that a gas price of $3.25 per gallon nationally is possible by December.
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