AAA: Where are gas prices headed from here?

Amid continuing geopolitical tensions in Eastern Europe, the Middle East and Northern Africa, American motorists are paying the lowest average retail price at the gas pump since mid-March.

This is due to U.S. refineries running near their highest production rates since 2005.  The national average price for regular unleaded gasoline decreased to $3.52 per gallon Friday, down two cents from last week.  Friday’s average price is 15 cents lower than one month ago and 11 cents lower than year ago prices.  This week gas prices jumped a fraction of a cent higher on Thursday, marking the first increase since June 27.  Gas prices this year generally have remained slightly less expensive on average than in recent years.  The annual average so far this year is $3.53 per gallon, which is the lowest average for the first seven months of the year since 2010.  Last year the national average through July 31 was $3.57 per gallon.

The decline in gas prices has come despite significant conflicts overseas in places like Iraq, Libya, Gaza and Ukraine. While oil prices remain expensive, prices are relatively stable because oil production and export levels have not noticeably changed.   The global oil market continues to closely monitor the situation abroad, including tensions between Ukraine and Russia, Hamas and Israel, and production issues in Libya due to civil unrest.  These events have yet to impact global supply, but have been cited by analysts as factors keeping a “floor” under crude oil prices and may limit how far U.S. pump prices can fall.  After starting the week at nearly $102 per barrel, crude oil closed at $97.88 per barrel Friday, down more than four percent from last week.  Friday’s close below $100 per barrel marks the third time since early May the commodity settled below triple digits.

The Energy Information Administration (EIA) noted in its weekly report that U.S. crude oil inventories dropped 3.7 million barrels to 367.4 million barrels, marking the fifth straight week of inventory declines.  Over the course of those five weeks, crude oil inventories in the U.S. have dropped more than 20 million barrels.  Gasoline stocks rose 636,000 barrels to 218.3 million barrels.  Gasoline demand increased last week to 9.006 million barrels per day (bpd), a level that is considered a good barometer of where gasoline demand has been this summer.

“Falling gas prices are nearly the opposite to what we usually see this time of year,” said Martha M. Meade, Manager of Public and Government Affairs for AAA Mid-Atlantic.  “Refineries are running at full tilt and there is more than enough gasoline in the market, which has helped bring down prices despite multiple overseas conflicts.  Gas prices may cost less than in recent years this August as long as refinery production remains strong and oil costs do not rise due to unexpected issues.  The biggest threat to continued falling prices would be a major hurricane striking the U.S. Gulf Coast.”

Gas prices have decreased in August for three of the previous five years.  Last year the national average fell about three cents per gallon during the month, but the average spiked 33 cents per gallon in August 2012.  August and July generally are the busiest driving months of the year, according to data collected by the Federal Highway Administration.  Last August, U.S. drivers drove an estimated 266.9 billion miles.  The biggest threat to continued falling prices would be a major hurricane striking the U.S. Gulf Coast.  Hurricanes often strike in August, which can disrupt oil production, refinery facilities and pipelines. In August 2012, Hurricane Isaac swept ashore in Louisiana. The brief closure of surrounding refineries helped increase the national average price of gas by 11 cents per gallon over nine days.

 

CURRENT AND PAST GAS PRICE AVERAGES

Regular Unleaded Gasoline (*indicates record high)

	8/3/14	Week Ago 7/27/14	Year Ago 8/3/13
National	$3.50	$3.53	$3.62
Virginia	$3.30	$3.34	$3.45
Charlottesville	$3.22	$3.24	$3.37
Norfolk Area	$3.38	$3.42	$3.53
Richmond	$3.25	$3.30	$3.42
Roanoke	$3.21	$3.24	$3.33
Crude Oil	$97.88 per barrel (at Friday’s close, 8/1/14)	$102.09 per barrel (Friday 7/25/14 close)	$107.89 per barrel (8/1/2013)

 

AAA is the most comprehensive resource for gas prices.  Unlike the Lundberg Survey of 7,000 gas stations, AAA reports reflect actual prices from credit card transactions at more than 100,000 gas stations in the U.S.