NEW YORK (MainStreet) — Gasoline prices will continue to retreat as crude oil prices have plummeted and demand from drivers remains constant.
Prices at gas pumps across the country are now averaging $3.27 a gallon, according to Gasbuddy.com. The lowest price is in Missouri, where gasoline prices are $2.98. The highest gasoline is in Hawaii at $4.17.
The rapid decline of international crude oil prices continued in a downward trend in September, bringing prices to under $100 per barrel for the first time since June 2012. The Energy Information Administration, the statistical division of the Energy Department, expects regular gasoline retail prices to decline to an average of $3.14 a gallon by December (for a $3.45 a gallon 2014 average) and hit a $3.38 a gallon average in 2015, compared with an average of $3.51 a gallon in 2013.
Despite turmoil across the globe and a “desperate” situation emerging in the Middle East, gasoline prices will continue to retreat, said Chris Faulkner, CEO of Breitling Energy, a Dallas oil and gas exploration and production company. The national average price of gasoline was $3.35 per gallon at the end of September, which is about 14 cents lower than a year ago. “As gasoline supplies continue to rise and demand stays flat, we feel confident that gasoline prices will remain low for the near to mid-term,” he said.
Gasoline prices will continue to slide downwards. There are a number of factors which dictate lower prices at the pump, and the largest contributor is the global price of crude oil. Oil prices have plummeted by more than 17% since they peaked in June when “the world thought ISIS could disrupt Iraqi oil production,” Faulkner said. “When this did not materialize, the fear factor built into oil was removed and oil prices retreated rather quickly,” he said.
After violence in Libya kept its oil production offline for over a year, the country’s oil fields are now producing 900,000 barrels per day.
Oil and gasoline prices are falling mainly as a result of the fact that supplies are growing faster than demand, said Bernard Weinstein, associate director of the Maguire Energy Institute at Southern Methodist University in Dallas.
While the U.S. economy is fairly robust, other countries are “mired in either slow growth or recession,” he said.
Gasoline prices will decline further during the fall and winter months when driver demand is typically lower and refineries switch to cheaper winter blends, Weinstein said.
Recent economic news outside of the U.S. hasn’t fostered much confidence while weaker economic figures from China could be signaling slower growth, said Rob Desai, an energy analyst at Edward Jones in St. Louis.
“Despite some big headlines about Iraq and Ukraine, supply has continued to grow with very few supply disruptions,” he said. “I think that is one area that could potentially cause prices to start increasing in the near term, but as of now, we don’t see that happening as the energy-related areas have been well defended.”
The result is positive news for consumers. One major difference between the current and previous drops in oil prices is that international prices have come down more than U.S. prices, Desai said.
This decline is significant, because gasoline recently has been “priced more off of international oil prices than U.S. prices,” he said. The main U.S. benchmark is just below $90, and the main international benchmark is about $92.
One thing that has not contributed is that gasoline inventories have reached almost a two-year low as of the most recent data because of refinery maintenance and continued exports.
While the decline in prices was “really quick,” prices will not move up in the near term unless a new geopolitical conflict occurs, Desai said.
“We haven’t had much global economic growth, which is ultimately the main long-term driver for increasing oil consumption and prices,” he said.
Article Author: Ellen Chang