Recent gas price declines, following near record-setting highs last month, were welcome news for motorists looking to kick off the official start of the summer driving season last weekend. While slight declines continued this week, gas prices stabilized in most areas in response to continued volatility in the crude oil market.
“Gas prices continue to be influenced by the crude oil market, as seen this week when prices at the pump stabilized somewhat following crude oil’s rise earlier in the week,” said Martha M. Meade, manager of public and government affairs for AAA Mid-Atlantic. “Yet despite recent volatility, analysts believe gas prices will continue to drop to within the $3.50 to $3.60 per gallon range by month’s end.”
The national average price of regular grade gasoline was $3.79 a gallon on Friday, down 2 cents from last week and down 19 cents in the last month, yet prices remain $1.07 higher than year ago prices. Although gasoline prices have dropped 19 cents since hitting this year’s high water mark of $3.98 a month ago on May 4th, the retail cost of gasoline, to the discomfiture of motorists, still remain at price levels not seen since July 2008.
In a shortened trading week, a weak U.S. dollar sent crude oil prices to a three-week high on Tuesday, above $103 per barrel. However, the release of disappointing economic reports mid-week – slumping housing, manufacturing and jobs data – sent crude oil down below the $100 mark. A downturn in economic growth could ultimately lead to a reduction in consumer spending, leading to lower fuel use.
On the international front, the fall in oil prices was tempered by continued unrest in the Middle East, with fighting in Yemen intensifying. Although Yemen is a small oil producer, it neighbors top oil exporter Saudi Arabia. Despite losses early in the day, crude oil closed at $100.22 Friday.
In its weekly report, the U.S. Energy Information Administration (EIA) data showed crude stocks rose 2.9 million barrels to 373.8 million barrels, well ahead of where they were at this time last year. Gasoline stocks rose 2.6 million barrels to 212.3 million barrels. The EIA also reported demand for gasoline was up 300,000 barrels to 9.431 million barrels per day (bpd).
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