Drivers land on Santa’s ‘nice’ list as gas prices fall to five-year low

The Week

Holiday cheer has come early for the motoring public, with the average for retail gasoline at its lowest level in more than five years. Friday’s national average price for regular unleaded gasoline dropped to $2.45. The average price at the pump is 15 cents less than one week ago and 41 cents less than a month ago. The national average is down 76 cents from the same date last year and has now dropped on 85 consecutive days (through Friday).  Motorists are paying $1.25 less than the peak 2014 price, which was $3.70 on April 8.  AAA estimates drivers are saving more than $400 million dollars each day compared to the high prices paid earlier this year.

The average price at the pump has fallen nearly 25 percent since the start of the year, and if the global price of crude continues to register new multiyear lows, these lower prices are likely to persist. Barring any unexpected spikes in global prices, or declines in domestic production, the price at the pump should remain relatively low approaching the New Year and into 2015.

Concerns of sluggish global oil demand combined with abundant supply continue to leave global oil markets searching for a bottom. Just two months ago market watchers were divided on the likelihood that the prices of West Texas Intermediate (WTI) would fall below $80 per barrel. Last week, for the first time since 2009, the price of WTI dropped below $60. WTI is now approximately 40 percent cheaper than the start of the year and nearly 50 percent below the high in June ($107.26). The Organization of Petroleum Exporting Countries (OPEC) continues to maintain production levels, and the cartel’s three biggest members are reportedly ramping up exports to Asia in an effort to sustain market share in that region. Market watchers are also beginning to consider the potential for geopolitical instability in countries that are heavily dependent on oil exports to balance their budgets, including Venezuela and Nigeria. At the close of formal trading on Friday, (WTI) settled at $57.98 per barrel.

The Energy Information Administration (EIA) noted in its weekly report that crude oil inventories were off by 800,000 barrels, dropping to 379.9 million barrels.  Gasoline inventories grew by a much-larger-than-expected 5.3 million barrels to 222 million barrels.  In addition, gasoline demand jumped to 9.373 million barrels per day (bpd), increasing by 824,000 bpd.  Not only had gasoline inventories hit a same week multiyear high, but demand did as well as last week's demand measurement for the same week was the highest since 2006.  The tendency going forward, though, is for inventories to build through January while demand tends to decline in January.

The Weekend

“There’s no place like home for the holidays and lower gas prices are filling stockings with a little more cash to spend on travel this year, as Americans pay the lowest prices at the pump since 2009,” said Tracy E. Noble, spokesperson for AAA Mid-Atlantic.  “AAA Mid-Atlantic projections indicate that over 2.4 million New Jersey residents will travel 50 miles or more from home for Christmas and New Year’s, an increase of 4.4% over last year.”

The Week Ahead

AAA projects that Nationally 98.6 million Americans will journey 50 miles or more from home during the year-end holiday season, an increase of four percent from the 94.8 million people who traveled last year. This upward trend marks the highest forecast growth rate for the year-end holiday season since 2009 and the highest travel volume for the holiday period on record. (AAA data dates back to 2001.)  Nearly 91 percent of all travelers (89.5 million) will celebrate the holidays with a road trip, an increase of 4.2 percent from 2013.  Lower gas prices, down more than $1.00 from 2014 highs, will enable more families to travel for the holiday season.

CURRENT AND PAST GAS PRICE AVERAGES

Regular Unleaded Gasoline (*indicates record high)

  12/18/14 Week Ago Year Ago
National $2.45 $2.60 $3.21
New Jersey $2.43 $2.55 $3.28
Trenton $2.54 $2.63 $3.33
Cape May County $2.46 $2.59 $3.28
Burlington County $2.40 $2.51 $2.26
Middlesex, Somerset, Hunterdon $2.42 $2.54 $3.29
Monmouth, Ocean Counties $2.42 $2.55 $3.29
Crude Oil $57.98 per barrel $57.60 per barrel $98.77 per barrel