AAA: Gas prices might be on decline through end of year
Despite reaching the highest level ever for a Thanksgiving holiday weekend (averaging $3.31), gas prices continue their decline that began in mid-October and will likely continue in the week ahead, if not through the remainder of the year. Thenational average for regular grade gasoline dropped 2 cents this week to $3.29 Friday. Prices are 14 cents below month ago prices and 41 cents above year-ago prices, yet 82 cents below the all-time high of $4.11 per gallon set over three year ago.
Crude oil began the month of December above the $100 per barrel mark for just the third time since June. One contributing factor to oil’s advance – U.S. retail sales jumped to a record $52.4 billion during the Thanksgiving holiday weekend, a signal of economic growth in the world’s biggest crude-consuming country. There was also optimism that European countries are participating in discussions to fortify the tenuous sovereign debt situation in the euro zone as a reason for optimism that, rather than split apart, the European Union (EU) may be moving to strengthen ties. In addition, concern for tension betweenIran and European governments will disrupt oil exports from theMiddle East supported crude oil’s rise. By week’s end crude oil dipped slightly, but not below $100, following signs of economic slowdown in Europe, a weaker factory sector inChina and new applications for unemployment in theU.S. rose for the second straight week, their highest level since late October. Yet the commodity saw its first weekly gain in three weeks, closing at $100.96 Friday.
The U.S. Energy Information Administration’s (EIA) weekly report showed crude stocks rose 3.9 million barrels to 334.7 million barrels. Gasoline stocks rose 213,000 barrels to 209.8 million barrels. Petroleum demand continues to be poor at 17.946 million barrels per day (bpd), the poorest week for demand since June 19, 2009, when theU.S. economy was in the thick of the Great Recession. More important, prior to the June 2009 dip, this week marks the first time since September 2001 demand has been so feeble. Gasoline demand saw a slight upswing, rising 177,000 bpd last week, leading some to believe year-on-year deficits may be smaller than the 4 percent declines seen recently.
“Pump prices continue to decline, despite recent crude oil increases, which is welcome news for motorists who paid the highest prices ever for gasoline during the month of November,” said Martha M. Meade, Manager of Public and Government Affairs for AAA Mid-Atlantic. “As the year-end holidays approach, motorists wonder if the downward trend will continue and the good news, according to analysts, is gas prices will continue to level off in the coming weeks before reaching a price bottom at some point during the winter when demand is typically low.”
The last 35 days of 2011 might get close to the performance of the first 35 days when gasoline prices were barely above $3.00 per gallon, according to Tom Kloza, chief oil analysts for OPIS. Kloza also suggests gas prices will average $3.25 per gallon through year’s end. Somewhere between Black Friday and Ground Hog Day prices will bottom out, with January as the likely month for the price bottom, which will become the launch pad for a spring rally that could potentially add another $1.00 to wherever the bottom occurs.