Gas prices remain stable two weeks ahead of the year-end holiday travel period, which is welcome news for cash-strapped motorists juggling holiday shopping and travel plans in the coming weeks.
U.S. gasoline prices today are lower than they have been since day 10 of the Libyan civil war (Feb. 24, 2011). The national average for regular grade gasoline remained unchanged over last week at $3.29 per gallon Friday. Prices are 14 cents below month ago prices and 31 cents above year-ago prices, yet 82 cents below the all-time high of $4.11 per gallon set in July 2008.
In fact, in a strange statistical coincidence, the year-on-year premium for motor fuel has slipped to its smallest increment since Dec. 6, 2010. Gasoline today costs 32.41cts/gal more than it did on this day last year, and on this day last year, gasoline cost 31.8cts/gal more than it fetched on December 6, 2009.
Crude oil spent seven consecutive days trading above the $100 per barrel mark before reversing its upward climb below the triple-digit threshold by week’s end. After trading as high as $102 per barrel, the commodity dropped to $98 Thursday, taking aim at its biggest weekly decline since September.
A weak U.S. dollar, data showing U.S. jobless claims fell to a nine-month low and optimism the EU summit would unveil a coherent plan to contain the Eurozone debt crisis all contributed to crude’s positive movement, however prices edged lower Thursday and Friday following U.S. Department of Energy reports that inventories unexpectedly rose last week, trumping expectations for a decline. Also contributing to crude’s decline was a strengthened U.S. dollar, speculation that fuel demand will falter amid continued signs Europe is struggling to get its sovereign debt crisis under control. Lastly, risks of a supply disruption from Iran were renewed as European Union leaders were expected to call for more sanctions against the Middle East nation at the EU summit. However, they are not likely to make an explicit call yet for an embargo on Iranian crude oil, amid mounting Western concerns that the OPEC producer has worked to design a nuclear weapon. Crude oil closed the week on the biggest weekly decline, down $1.58 per barrel on the week to $99.41 Friday.
The U.S. Energy Information Administration’s (EIA) weekly report showed crude stocks rose 1.3 million barrels to 336.1 million barrels. Gasoline stocks rose 5.1 million barrels to 215.0 million barrels. Gasoline demand slipped by 196,000 barrels per day (bpd) to 8.574 million bpd, 597,000 bpd below the same week in 2010. There are two schools of thought when forecasting demand numbers for the remainder of the year. Some analysts believe the next three weeks will see a seasonal life, while others say gas demand numbers will continue to drop to 8 million bpd into January.
“Gas prices continue to hold steady at the pump as the year-end holidays approach, which is welcome news for motorists looking to save a few pennies during the holiday shopping and travel season,” said Martha M. Meade, Manager of Public and Government Affairs for AAA Mid-Atlantic. “Demand remains low, which has been a key factor despite recently rising crude oil prices, and barring any unforeseen national or international situation that might influence a crude oil upswing, gas prices are likely to remain stable through the remainder of this year and into January.”
Looking ahead to 2012, the EIA revised its short term energy outlook. The agency expects prices at the pump will remain at or below current levels until early spring 2012, when prices are expected to average $3.45 per gallon in 2012. In addition, the EIA projects crude oil will average $98 per barrel in 2012, up from $91 per barrel in a previous estimate. The forecast for 2012 gasoline prices targets a $3.45 per gallon average, with a second quarter peak of $3.51 per gallon and a drop to $3.38 per gallon in the second half of the year. If the EIA is right, gasoline may actually turn out to be cheaper in 2012 than in 2011.
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Chris Graham
