This fall when filling-up at the pump, AAA forecasts that the majority of motorists in Virginia and the rest of the Mid-Atlantic region will likely find savings of potentially 25 cents/gallon compared to this summer. Cheaper crude oil, the expected decline in gasoline demand after Labor Day and the move to winter-blend gasoline are poised to push gas prices cheaper than they already are at gas stations across the region.
“The cheapest gas prices of the year are likely set to arrive at retail pumps in the Mid-Atlantic states in the months ahead,” said Tammy Arnette, Senior Public Affairs Specialist for AAA. “Cheap crude oil and the post-summer demand slump are among the factors that will contribute to the major shift to savings.”
Since Memorial Day, gasoline stocks have fluctuated in the region ranging between 58 – 65 million bbl in the Energy Information Administration’s (EIA) weekly reports. EIA’s report for the week ending August 2 showed a 3-million bbl deficit compared to the beginning of the third quarter in 2018. Part of the year-over-year deficit stems from the pending closure of Philadelphia Energy Solutions (PES), the largest refinery on the East Coast.
This would usually lead to a spike in gas prices. However, gasoline imports are easing supply concerns and keeping retail gasoline prices moving lower. Though any further supply disruptions could cause prices in the region to spike temporarily.
Oil dynamics
AAA forecasts crude prices to range between $50 and $60 per barrel this fall. That is a considerable drop from last fall when prices ranged between $60 and $75. Why so cheap? Current total domestic crude inventories sit at 438.9 million bbl, which is 31.5 million bbl higher than last year at this time. The continued glut of oil encouraged the Organization of the Petroleum Exporting Countries (OPEC) and its partners to extend their 1.2 million b/d production reduction agreement through the end of the year. However, so far, reduced supply from OPEC and its partners has not led to a sustained higher price for crude.
As always, hurricane season has the potential to cause declining gas prices to shoot back up. This month, the National Oceanic and Atmospheric Administration predicted that 2019’s Atlantic hurricane season is expected to be above normal, with 10 to 17 named storms, including five to nine hurricanes. The mere threat of a hurricane making landfall can shutter domestic crude production, leading to spikes in crude and gasoline prices. In 2017, Hurricane Harvey caused the national gas price average to jump 30-cents in a matter of days.
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