Gas prices have been on a downward trend throughout the spring season and could continue to slide well into summer, according to many analysts.
The primary factors driving retail gas prices lower in recent weeks have been low demand, increased domestic production, continued disappointing economic news and lower crude oil prices. The national average price for a gallon of regular unleaded gasoline was $3.51 Friday, unchanged from a week ago. This price is 14 cents less than one month ago and 32 cents less than one year ago. The national average has fallen 28 cents the peak 2013 price to date of $3.79 on Feb. 27. In 2011 the national average for regular unleaded gasoline peaked at $3.98 on May 5. In 2012 the price peaked at $3.94 on April 5 and 6. The national average remains 27 cents below the peak 2013 price to date of $3.79 on Feb. 27.
Crude oil began the week below the $90 per barrel mark, but by mid-week the commodity jumped over that threshold, in position for its biggest weekly gain since July 2012. Better than expected U.S. economic data – U.S. unemployment benefit claims dropped to their lowest level in nearly five years – coupled with a weakened U.S. dollar, supported crude oil’s upward climb this week. Ongoing tensions in the Middle East have also influenced crude oil’s rise, in particular reports that the Syrian government has likely used chemical weapons on its people. Analysts will also continue to watch U.S. gasoline demand, which rebounded last week ahead of the peak spring-summer driving season. However, Friday Commerce Department reported U.S. gross domestic product (GDP) expanded at a rate of 2.5 percent (slower than the 3 percent rate expected), increasing worries that the economy will decelerate in the second quarter and ended crude oil’s two day rally. Crude oil settled at $93.00 Friday, up 5.6 percent on the week.
In its weekly report, the Energy Information Administration (EIA) data showed crude oil stocks rose 947,000 barrels to 388.58 million barrels. Gasoline stocks fell 3.9 million barrels to 217.8 million barrels. Gasoline demand bounced back by a brisk 367,000 barrels per day (bpd) to 8.75 million bpd. However, the four-week average for gasoline demand was down 1.7 percent from the same period a year ago and the lowest since April 1997. Another week brought another milepost for EIA data in the form of U.S. crude oil production of 7.326 million bpd. That number is 1.213 million bpd above last year and represents the highest domestic production since April 17, 1992.
“Gas prices have really dropped in the past eight weeks – down 28 cents since reaching a 2013 peak of $3.79 on February 27 – well ahead of when a spring price drop typically occurs,” said Martha M. Meade, Manager of Public and Government Affairs for AAA Mid-Atlantic. “That said, recent declines leave motorists wondering how long this trend will continue and how low prices will drop. Analysts believe prices will likely drop below the $3.50 per gallon mark in the coming weeks and could even drop below the 2012 low of $3.33 per gallon over the July Fourth holiday weekend.”
Gas prices have remained above $3 for more than two years. So are motorists used to this gas price threshold? In a recent consumer survey, AAA found 61 percent of those surveyed (1,000 adults) believe gas is too high when it hits $3.50 per gallon, and 86 percent said they respond to high gas prices by driving less. Ninety percent said gasoline prices are too high when they reach $4 a gallon. Analysts believe the national gas price average will likely drop below $3.50 in the coming days/weeks (for the first time since February). Prices should mimic last year, yet the drop could be slightly lower. Looking ahead to the second half of the year, which begins in hurricane season, prices will be much more susceptible to spikes brought on by potential refining interruptions in the Gulf of Mexico.
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Chris Graham
