AAA: Are gas prices headed downward?

Gas prices across much of the country have begun to thaw a bit after a span of record-breaking low temperatures, primarily due to decreased demand.  The national average price at the pump dropped to $3.30 per gallon Friday.  This is a penny less expensive than one week ago, yet eight cents more than one month ago and a penny more than the same date last year.  After rising to $3.33 on January 3 – a more than two-month high – the national average has now declined for 12 of 14 days, but has fallen for a  total of just over three cents during this span.

After settling above $100 per barrel for one day on December 27, which ended a streak of nine consecutive weeks below the triple digit threshold, West Texas Intermediate (WTI) crude oil prices have tumbled back toward the $90 per barrel threshold.  This sharp decline has been attributed to a stronger U.S. dollar, the return to the global market of Libyan crude, further easing of geopolitical tensions with Iran, and continued concerns surrounding weak domestic demand for gasoline.  Crude oil prices rebounded slightly this week to settle at $94.37 Friday.  This week’s settlement is nearly two percent higher on the week and nearly three percent higher than the $91.66 settlement recorded last Thursday (Jan. 9), which was the lowest price since May 1.

In its weekly report, the Energy Information Administration noted that U.S. crude oil stocks dropped 7.7 million barrels last week to 350.2 million barrels.  A weak import level for crude oil inventories of more than 1 million barrels per day (bpd) to 6.889 million b/d was likely the largest culprit in the drop.  Gasoline stocks saw a 6.2 million barrel build to 233.1 million barrels.  Gasoline demand last week was expected to be weak, but it could be described as poor at just over 8 million bpd, the weakest gasoline demand figure in a little over a year.  However, the 8.01 million bpd is likely going to serve as a bottom for this year.  It has been more than a decade since gasoline demand fell below the 8 million barrel threshold.

“Like the weather throughout the region, prices at the pump continue to thaw slightly, primarily due to declining crude oil prices,” said Martha M. Meade, Manager of Public and Government Affairs for AAA Mid-Atlantic.  “In addition, severe winter weather has also played a part in keeping gas prices down as consumer demand remains low.  Gas prices could continue this downward trend in the weeks ahead should these factors continue.”

Gas prices most likely will average slightly less in 2014 as refineries continue to expand production capacity and increasingly rely on North American crude oil.  Increased refinery capacity and domestic crude oil production should help provide a cushion in case something goes wrong, but there are no guarantees when it comes to gas prices.  There will remain an outside chance of paying higher prices due to unexpected global events or significant economic growth.  In 2013, consumers paid an average of $3.49 per gallon for gas, making the past year the least expensive year to fill up since 2010.  In 2012, pump prices averaged $3.60 per gallon, which was the most expensive ever.  Gas prices in 2011 were the second highest on record at $3.51 per gallon, while 2013 holds the rank of third most expensive.

CURRENT AND PAST GAS PRICE AVERAGES

Regular Unleaded Gasoline (*indicates record high)

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.