Gas prices continued their decline for the fourth consecutive week, dropping below the $3.70 mark as the summer driving season motors on.
The national average price of regular grade gasoline was $3.68 a gallon on Friday, down 4 cents from last week and down 25 cents in the last month, yet prices remain 97 cents higher than year ago prices and 43 cents below the all time high of $4.11 a gallon set nearly three years ago. The trigger for declining gas prices – crude oil – was also on the decline this week. The escalating Greek debt crisis, coupled with shrinking U.S. factory activity in the mid-Atlantic region (shrinking 7.7 percent to its lowest in two years, contrary to forecasts for a 6.8 percent rise) and strength in the dollar, sent crude oil prices downward for most of the week.
The commodity traded to an intra-day low of $91.12 Thursday before inching up to settle at $94.95. Analysts believe Greece will weigh into oil prices in the weeks ahead, contributing to the overall downward trend expected given recent negative economic data, both nationally and internationally. Crude oil settled at $93.01 Friday, down nearly 7 percent this week in the biggest fall since May. In its weekly report, the U.S. Energy Information Administration (EIA) data showed crude stocks fell 3.4 million barrels to 365.6 million barrels, a larger than expected drop.
Gasoline stocks rose 600,000 barrels to 215.1 million barrels. The latest EIA report also showed solid demand for gasoline. Last week’s gasoline demand numbers advanced 207,000 barrels per day (bpd) from the previous week to 9.37 million bpd. The four-week average is 0.5 percent above the same period in 2010, and the year-to-date tally is only 0.3 percent behind last year, even though prices have been about $1.00 per gallon higher.
“Prices at the pump rarely decline as rapidly as they increase, however, gas prices have steadily declined over the past four weeks just in time for the summer driving season,” said Martha M. Meade, manager of public and government affairs for AAA Mid-Atlantic. “Since peaking just shy of the $4.00 mark in early May, gas prices have dropped 30 cents per gallon. With the July Fourth holiday weekend just two weeks away, recent gas price declines are welcome news for motorists planning to take to the road.”
The International Energy Agency (IEA) notes in its mid-term report that higher demand and reduced spare OPEC capacity will leave oil markets under greater strain between now and 2012 than previously thought. It raised its five-year global oil demand forecast by an average of 700,000 bpd compared with the previous medium term report issued in December.
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Chris Graham
