Gas prices are expected to continue to fall as 2012 draws to an end. The national average price for a gallon of regular self-serve gasoline dropped 3 cents this week to $3.37 Friday – 9 cents less expensive than one month ago and 8 cents more expensive that one year ago.
Although prices have consistently trended downward since mid-September, they continue to be the highest on record for the current calendar day, a streak that began on August 20. The national average price of gasoline dropped 11.9 cents a gallon (3.38 percent) in November, the fifth monthly decline in gas prices this year. The November monthly average price of gas was $3.44 a gallon, which was the lowest monthly average since July.
While national retail gas prices have declined each day during the past week, crude oil prices increased slightly early in the week, as market attention has focused on the impact of the looming U.S. fiscal cliff and the broader health of the global economy. Crude oil breached the $90 per barrel mark during intraday trading on Monday, but subsequently posted four straight days of losses (through Friday) to settle in what has become a comfortable $84 to $88 per barrel range. Factors that lead to the commodity’s downward trend this week include a strengthening U.S. dollar, increasing crude production levels in the U.S. and low demand. On the horizon are the months of January and February, which are miserable demand months for gasoline. However, there remains lingering concerns that political tensions and violence in the Middle East could cause oil supply disruptions and, in turn, increased crude oil prices. Crude oil settled at $85.93 Friday, down 3.5 percent for the week.
In its weekly report, the U.S. Energy Information Administration (EIA) data showed crude stockpiles fell 2.357 million barrels to 371.767 million barrels, which is still a seasonably high level. Gasoline stockpiles took a huge jump of 7.86 million barrels to 212.11 million barrels. An increase in production by U.S. refiners helped boost gasoline inventories by the biggest weekly margin since September 2001. Gasoline demand slipped to 8.354 million barrels per day (bpd) last week, down 73,000 bpd for the week; 219,000 bpd from last year; and 817,000 bpd beneath where it was during the same week in 2010. Demand in the last two weeks has averaged just 8.390 million bpd. December should bring a couple of weeks of higher demand — figures in the 8.7-million- bpd area are likely in the week leading up to and just after Christmas — but January numbers may once again flirt with 8 million bpd or lower.
“Although 2012 will be the most expensive year on record for gas prices, AAA believes gas prices will continue to decline and motorists could actually pay the lowest gas prices of the year by New Year’s Eve,” said Martha M. Meade, Manager of Public and Government Affairs for AAA Mid-Atlantic. “Motorists are welcoming any relief at the pump, especially as the holiday season is underway. However, there is a small chance that pump prices could rise or remain flat as a result of rising oil prices and other economic factors.”
AAA analysts believe all signs suggest that gas prices should continue falling, with all refineries on line, demand slowing for the winter, and domestic crude at a low price. AAA predicts that the national average price of gas will slowly drop through the end of the year and average between $3.20 and $3.40 a gallon by New Year’s Day. To date, the lowest daily average of the year is $3.28 a gallon from Jan. 1. The average annual price of gas for 2012 will be the most expensive on record. The annual average, to date, is $3.63 a gallon, which is 12 cents more than the current record high set in 2011. Gas prices nationally would need to average about $2.05 a gallon through the end of the year to not break the record.
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Chris Graham
