Summer officially began on Friday, and motorists ready to hit the road for annual vacations continue to find gas prices have remained relatively stable, even dropping a few pennies in certain areas. The national average price for regular unleaded gasoline fell four cents this week to $3.59 per gallon Friday. This is seven cents lower than month ago prices, yet 12 cents more than year ago prices.
National gasoline markets in recent months have been driven by regional supply and production issues rather than by the price of crude oil, which has traded in a narrow $5 range. However, after flirting with the $100 per barrel mark mid-week, crude oil dropped sharplyThursday, posting its biggest one-day drop in seven months (since November 7, 2012) to settle at $95.40 per barrel. A continued Chinese manufacturing slowdown and signals from the Federal Reserve that a reduction in monetary stimulus is in sight triggered the commodity’s decline. The U.S. dollar strengthened following the Federal Reserve meeting, also pressuring crude prices downward. On the geopolitical front, tensions continue to escalate in Syria. While Syria is not a major oil producing nation, there is the risk that fighting might spread to other countries in the region, and this has kept some upward pressure on crude oil prices. Crude oil settled at $93.69 Friday, down 4.4 percent on the week.
In its weekly report, the Energy Information Administration (EIA) data showed crude oil stocks rose 313,000 barrels to 394.1 million barrels. Gasoline stockpiles rose by a negligible 183,000 barrels to 221.7 million barrels. Demand data may get special scrutiny. Demand numbers were also a mixed bag. Total petroleum demand rose by 500,000 barrels per day (bpd) to 18.4 million bpd, but the four week average trails last year by about 1.5 percent. Gasoline demand rose 192,000 bpd to 8.84 million bpd, which compares favorably to a very subpar middle of June 2012. The four week average figure for gasoline demand shows offtake to be down about 37,000 bpd from 2012, and given miserable spring weather, that is a negligible difference.
“AAA continues to believe gas prices will drop below $3.50 per gallon by the end of the month, especially since domestic production and distribution concerns have eased and crude oil has declined,” said Martha M. Meade, Manager of Public and Government Affairs for AAA Mid-Atlantic. “However, market-watchers have turned a wary eye to tensions in Syria to see if oil prices will be affected. With crude prices starting to settle, prices at the pump should remain stable, barring any unforeseen circumstances.”
AAA Travel projects 40.8 million Americans will journey 50 miles or more from home during the Independence Day holiday, a 0.8 percent decrease from the 41.1 million people who traveled last year. Approximately 34.4 million people (84 percent) plan to drive to their destination, a decrease of 0.7 percent from the 34.7 million who drove last year. The anticipated decline in holiday travel is predominantly due to a shorter holiday period. With the Fourth of July landing on a Thursday this year, the holiday period has returned to the standard five-day holiday, compared to the six-day period in 2012 when the holiday fell on a Wednesday. Approximately 34.4 million people (84 percent) plan to drive to their destination, a decrease of 0.7 percent from the 34.7 million who drove last year.
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Chris Graham
