Prices at the pump continued their surprising spring slide this week, dropping from a high of $3.94 per gallon on April 6 to below year ago prices for the first time since October 26, 2009 (a 910-day streak).
The national average price for regular grade gasoline dropped a nickel this week to $3.83 per gallon Friday. Prices are 8 cents lower than a month ago and 5 cents lower than year ago prices, yet remain within 28 cents of the all-time record high of $4.11 per gallon set nearly three years ago (July 2008). One year ago gas prices were on the rise and would top out at $3.99 per gallon on May 5.
Crude oil remained relatively stable early in the week, trading within its recent comfort zone of $101 to $105 per barrel. By week’s end, prices crept higher, supported by a boosted U.S. economic outlook by the Federal Reserve. The Fed expects the U.S. economy to grow between 2.4 percent and 2.9 percent in 2012. That’s up from a January forecast of 2.2 percent to 2.7 percent growth. The Fed also expects unemployment to drop to between 7.8 percent and 8 percent by the end of the year. The rate is currently 8.2 percent.
The commodity was also supported by a solid pickup in existing home sales, up more than 4 percent to a near two-year high, and a weakened dollar, which outweighed news that U.S. initial claims for jobless benefits fell only slightly last week, reflecting a struggling jobs market that could crimp energy demand in the world’s top oil consumer. Crude oil continued its late week rally into Friday, briefly advancing above the $105 mark before ending the week at $104.93.
In its weekly report, the Energy Information Administration (EIA) showed the nation’s crude oil stocks rose for the fifth straight week by 4.0 million barrels to 373.0 million barrels. The 2011 inventory build topped out on May 27 (at 373.8 million barrels), so this year could see a build top out at 380-million-barrels. If so, that would represent the most crude in U.S. commercial tanks since just before the Gulf War in August 1990. Gasoline stocks dropped 2.2 million barrels to 211.7 million barrels. Gasoline demand, which showed some signs of life in late March and early April, dipped back into the doldrums last week. Measured at 8.496 million barrels per day (bpd), last week’s EIA figure is 279,000 bpd behind the previous week and 652,000 bpd behind same week last year.
“After a 66-cent increase in gas prices per gallon since the beginning of the year, the recent decline in prices at the pump, albeit slow, but steady, has motorists and analysts alike wondering if the 2012 gas price peak is behind us,” said Martha M. Meade, Manager of Public and Government Affairs for AAA Mid-Atlantic. “Analysts, who months ago said gas prices would likely bottom out toward the end of April or early May, now say that in light of the recent spring slide in prices at the pump it may be a while before we see a dramatic climb in prices again. This would be welcome news for motorists as we approach the unofficial start of summer in less than four weeks.”
While much hype was made earlier this year about how gas had run up further and faster than any time before and may even reach a new all-time high of over $4.11 gallon, prices have been slowly declining since touching $3.95 a gallon at the beginning of April. Some analysts believe that if we do not have any supply issues or refinery outages, we very well may have seen highs for the summer. However, in the Mid-Atlantic region all eyes continue to be on the refineries in the Philadelphia area, two of which have been idled since earlier this year and one threatening to shut down at the end of June. If buyers are not found and further supply disruptions occur due to more refinery closures, gas prices in the region and along the East Coast could rise considerably during the summer months.
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Chris Graham
