After reaching an October peak price of $3.82 per gallon (Oct. 8), the national gas price average has dropped considerably during the past two weeks. The national average price for a gallon of regular self-serve gasoline has fallen for 17 straight days to $3.58 per gallon Friday, its lowest level since August 4th.
Friday’s price marks a 14-cent decline in the past week, yet remain 23 cents below month ago prices and 14 cents above year ago prices. However, the national average is 53 cents below the $4.11 record high set 2008. Regional supply concerns have diminished and demand continues to weaken, two factors that have contributed to the recent gas price plunge.
Crude oil losses extended to a fifth straight day, as of Wednesday, dropping to $85.73 per barrel, a 7 percent drop in a week’s time and the first time the commodity has seen this level since July. Oil prices rebounded Thursday due to U.S. economic data: Orders for durable goods surged 9.9 percent in September, exceeding expectations, and first-time jobless claims dropped by 23,000 to a seasonally adjusted 369,000 last week. Also pushing crude oil lower is the fundamental change in supply and demand. The Department of Energy reported a 5.9 million barrel build in the nation’s crude oil stockpiles, coupled with decreased seasonal demand, which has caused a decline in oil prices. Crude oil finished the week down 4 percent to $86.26 at Friday’s close.
In its weekly report, the U.S. Energy Information Administration (EIA) data showed crude oil stocks rose 5.9 million barrels, a much-larger-than-expected build, to 375.1 million barrels – more than triple industry estimates. Current crude stock levels are up 11 percent from last year and more than 12 percent above the five-year average. U.S. gasoline stock rose 1.4 million barrels to 198.57 million barrels. Gasoline demand was a disappointment, but not necessarily a surprise considering the seasonal shifts that typically happen this time of year. According to EIA statistics, gasoline demand checked in at 8.493 million barrels per day (bpd), the lowest weekly tally since the week of March 16. The four-week averages are trailing the previous year by 1.8 percent.
“Gas prices continued their decline into a third week, with the national average price (and many local prices) dropping double-digits in the past week alone,” said Martha M. Meade, Manager of Public and Government Affairs for AAA Mid-Atlantic. “Industry experts believe prices at the pump will continue to decline, perhaps by as much as 50 cents per gallon by Thanksgiving. Although all eyes are on Hurricane Sandy, as the storm has the potential to affect refining along the east coast early next week. Any interruption in refining capabilities could lead to a brief increase in crude oil and gasoline prices.”
Hurricane Sandy, a category 1 storm as of Friday morning, may pose operational challenges to oil refineries in Delaware, Pennsylvania, New Jersey and eastern Canada by early next week. The storm is seen moving north-northwest over the next three days. While remaining offshore as it makes its way up the U.S. eastern seaboard, Sandy is expected to come close enough to the coasts of South and North Carolina to dump heavy rains there. Computer model forecasts diverge widely. One predicts landfall in Maine Wednesday morning while another has Sandy hitting Delaware Monday afternoon. In either scenario, Sandy is likely to bring the heaviest October rain ever recorded in the Northeast U.S. As is always the case with major weather events, any disruption in oil production or refining capabilities would likely lead to an increase in crude oil and gasoline prices.
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Chris Graham
