Gas prices continue to ease across the country, seeing double-digit drops in some regions, after the longest string of increases in nearly two years.
The national average price of regular grade gasoline dropped to $3.71 Friday, down six cents for the week. Prices remain 16 cents above last month, yet five below a year ago. Recent declines and the fact that the national retail average has fallen back below the year-ago price supports AAA’s prediction that gas prices will peak this spring at a lower level than recent years. In 2011, the national average for regular unleaded peaked at $3.98 on May 5. In 2012, the price peaked at $3.94 on April 5 and 6.
Crude oil prices fell below the $90 per barrel mark early in the week due to a strengthened U.S. dollar and data showing U.S. crude supplies 10 percent higher than a year ago (an indication of weak demand). However, the commodity returned to trade above the $90 per barrel mark on Thursday following a rally of the euro upon news that several European banks would leave interest rates unchanged. Despite crude oil’s upward movement, prices in the last week have been the lowest in 2013 due to worries over the Eurozone debt crisis, Iran’s ongoing talks with Western nations over its nuclear program easing geopolitical risks in the oil markets, and refineries getting back online after maintenance shutdowns. The death of Venezuelan President Hugo Chavez had little effect on crude oil this week. However, this could change when the country (which sits on the world’s second-largest oil reserves) selects a new leader. Crude oil closed at $91.95 Friday, up slightly for the week.
In its weekly report, the Energy Information Administration (EIA) data showed crude oil stocks rose (for the seventh straight week) 3.83 million barrels to 381.35 million barrels, much greater than the 1.1 million barrel build analysts expected, and raising the nation’s supply of crude 10.3 percent above year-ago-levels. The United States hasn’t started the month of March with this much crude since the Depression Era, and current stock levels could eventually top the post-Gulf War high of 387.3 million barrels reached last June. Gasoline stocks fell by 616,000 barrels to 227.35 million barrels, a smaller than expected draw. Gasoline demand dipped 233,000 barrels per day (bpd) to 8.364-million bpd, cutting some of the year-on-year increases that have been seen recently, yet still 101,000 bpd higher than last year.
“Relief at the gas pump is welcome news for motorists who paid the highest prices for gasoline ever for the months of January and February,” said Martha M. Meade, Manager of Public and Government Affairs for AAA Mid-Atlantic. “Falling crude oil prices and refineries getting back online are expected to push gas prices lower in the coming weeks. Although it is too soon to say whether prices have peaked for 2013 (at $3.78/gallon nationally) considering the Northeast and Midwest have yet to change over to summer blends, AAA partner and OPIS chief oil analyst Tom Kloza believes prices could drop 20 to 25 cents per gallon this month in many markets.”
March 2012 saw gas prices creep higher almost every day, however, March 2013 is starting out with gas prices moving downward. As gas prices begin to fall, motorists will undoubtedly welcome the savings in their wallets. Based on recent demand patterns, the Oil Price Information Service (OPIS) estimates that every penny the national average gas price drops adds up to about $3.57 million per day. Should gas prices drop 20 cents per gallon to last year, OPIS estimates the daily savings would be nearly $71.4 million.
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Chris Graham
