AAA: Gas prices trending slightly downward

As much of the nation was gripped by the deep freeze of the polar vortex, gas prices moved slightly downward for six straight days (through Thursday).  Today’s national average price at the pump is $3.31 per gallon.  This is two cents less expensive than one week ago, yet five cents more than one month ago and even with the same date last year.

After settling above $100 per barrel for one day on December 27 – ending a streak of nine consecutive weeks below the triple digit threshold – West Texas Intermediate (WTI) crude oil prices have settled lower each trading day since.  This sharp decline to end 2013 and begin 2014 has been attributed to a stronger U.S. dollar, the return to the global market of Libyan crude, increased domestic crude oil inventories and continued concerns surrounding weak domestic demand for gasoline.  The decline continued this week as WTI crude dropped to an eight-month low of $91.66 on Thursday.  Crude oil settled at $92.72 Friday, down one percent on the week.

In its weekly report, the Energy Information Administration noted U.S. crude oil stocks dropped by 2.7 million barrels to 357.9 million barrels.  Gasoline stocks rose 6.2 million barrels to 227 million barrels.  Gasoline demand dropped to 8.274 million barrels per day (bpd), down 619,000 bpd and the lowest levels seen since the first week of January last year.  While the number does look very weak for gasoline demand, it is very much in line with where demand was the first week of January the last two years.  Expectations are that next week’s demand figures could challenge some of the lows seen this century based on seasonality as well as winter storms in some of the most densely populated regions of the country.

“After a steady two-week-plus period of gas price increases to begin the new year, we’ve seen the trend reverse as prices at the pump declined slightly for most of the week,” said Martha M. Meade, Manager of Public and Government Affairs for AAA Mid-Atlantic.  “Gas prices have been pushed lower by declining crude oil prices (trading at 8-month lows) and decreased demand due to severe winter weather across most of the country.  Should these factors continue, gas prices could continue their downward trickle in the weeks ahead.”

In its Short-Term Energy Outlook, the EIA projects the annual average regular gasoline retail price for 2014 will drop to $3.46 per gallon, from $3.51 per gallon in 2013.  EIA also projects WTI crude oil prices will average $93 per barrel in 2014.  EIA estimates U.S. total crude oil production averaged 7.5 million barrels per day (bpd) in 2013, an increase of 1.0 million bpd from the previous year.  Projected domestic crude oil production continues to increase to 8.5 million bpd in 2014 and 9.3 million bpd in 2015.  The 2015 forecast would mark the highest annual average level of production since 1972.

CURRENT AND PAST GAS PRICE AVERAGES

Regular Unleaded Gasoline (*indicates record high)