AAA: Gas prices continue to fall as summer driving season nears end

After skyrocketing last month, gas prices continue to fall across the country. Gas dropped for the first 14 days in August, easing nearly ten cents per gallon, but the trend could be short-lived.  The national average price for regular unleaded gasoline dropped to $3.54 per gallon Friday, a four-cent drop in the past week.  The current price is 12 cents more expensive than one month ago and 17 cents cheaper than the same day last year.

Nationally, the pump price average is 25 cents lower than the peak price this year of $3.79 on February 27 and appears to have hit a summer-low of $3.47 on July 7.  However, gas prices may fluctuate/increase later this month due to continued tension in the Middle East and the potential for late-summer hurricanes and refinery problems.  However, if no major hurricanes threaten the Gulf Coast and refineries continue to run smoothly heading into the mid-September change-over to winter-blend gasoline, prices could remain flat or even decline further.

Crude oil traded above the $105 per barrel throughout the week, as turmoil in Egypt and Libya continued to threaten the security of oil supplies in the Middle East and North Africa, a region controlling one-third of the world’s oil output.  Violence in Egypt could affect the Suez Canal, through which three million barrels per day (bpd) of oil travel.  While oil production and exports in Libya have been crippled by civil unrest, analysts fear geopolitical tension could spread throughout the Middle East and North Africa, sending global oil markets higher.  Crude oil settled at $107.46 per barrel at Friday’s market close, up nearly 1.5 percent on the week.

In its weekly report, the Energy Information Administration (EIA) data showed crude oil stocks saw a 2.8 million barrel decline, surpassing analyst expectations, to 360.5 million barrels.  Gasoline stocks dropped 1.2 million barrels, in line with analyst expectations, to 222.4 million barrels, putting stocks at 5.7 percent above the five-year average and more than 18 million barrels above this time last year.  Implied demand for gasoline declined 56,000 bpd to 9.19 million bpd last week. However, on a four-week average, demand is 9.14 million bpd or 2.6 percent above the same four week period as last year.

“Prices at the pump continue to retreat, which is welcome news for motorists, however AAA cautions that prices could seesaw as the summer driving season draws to an end,” said Martha M. Meade, Manager of Pubic and Government Affairs for AAA Mid-Atlantic.  “While gasoline demand is expected to increase during the last few weeks of summer, escalating tensions in the Middle East and the impending hurricane activity could lead to potential refinery processing and distribution issues, sending crude oil and gas prices back up.”

End of summer travel could be met with uncertainty at the gas pumps.  Although prices have dropped in recent weeks, geopolitical tension in the Middle East and recently developed storms in the Atlantic could send crude oil, and in turn gasoline, prices higher should production, distribution and gasoline supplies be disrupted.  According to the U.S. National Hurricane Center, Tropical Storm Erin formed in the far eastern Atlantic Ocean at the end of last week, as well as a second low pressure system in the northwest Caribbean Sea near the Gulf of Mexico, though it is too early to determine if either storm will head into the Gulf of Mexico and compromise oil production.