Cheapest Summer Gas Prices Since 2009 on the Way
There is a good chance that average U.S. gas prices will drop soon due to stabilizing crude oil costs and as refineries complete seasonal maintenance, which would result in the cheapest summertime gas prices since 2009. Friday’s national gas price average for regular grade unleaded gasoline was $2.76, two cents per gallon higher than one week ago and 13 cents more per gallon than one month ago. Significant yearly discounts remain, with Friday’s national average representing a savings of 90 cents per gallon compared to the same date last year. Gas prices often drop or remain flat in June as refineries complete seasonal maintenance and gear up production for the busy summer driving season. This production trend likely will continue this year, which means gasoline supplies could soon grow even more plentiful. Gas prices have declined by an average of 12 cents per gallon in June over the past five years.
West Texas Intermediate (WTI) crude oil prices rallied last week, following reports of violence in Saudi Arabia and weekly U.S. rig counts falling by double-digits. The rally continued into this week as crude rallied to close at a six-month high Tuesday ($61.26/barrel), powered by a then plunging U.S. dollar and hopes that U.S. crude oil inventories will continue to decline. The U.S. dollar rallied on Friday as a result of a positive May employment report. OPEC agreed to sustain its current output levels as a result of the June 5 meeting in Vienna, keeping the global market oversupplied in the near term and placing a ceiling on how high crude prices could move. At the close of Friday’s formal trading on the NYMEX, crude oil settled at $58.84 per barrel.
The Energy Information Administration (EIA) noted in its weekly report that crude oil inventories dropped 1.9 million barrels to 477.4 million barrels, extending a draw streak to five weeks. Gasoline stocks dropped 300,000 barrels to 220.6 million barrels, however stocks are running at roughly an 8.5-million-barrel surplus to last year. After posting the highest pre-Memorial Day demand figure last week (and the fourth-highest week on record), there is almost always a drop off. For the week ending May 29, the drop off was a bit more severe than what had been common over the past decade as implied demand was off by 756,000 barrels per day (bpd) at 8.978 million bpd, it also breaks a three-week streak of demand topping 9 million bpd.
“Gas prices have jumped much faster this spring than we typically see because of seasonal refinery issues and rising oil costs, though pain at the pumps has been less costly than in the past because gasoline remains a relative bargain in most areas compared to recent years,” said Tracy E. Noble, Manager of Public and Government Affairs for AAA Mid-Atlantic. “This could be the year of the summer road trip with lower gas prices motivating millions of people to travel. Many drivers are likely to save hundreds of dollars this summer as gas prices remain more affordable than in recent years.”
The Week Ahead
There is a good chance that average U.S. gas prices will drop soon due to stabilizing crude oil costs and as refineries complete seasonal maintenance, which would result in the cheapest summertime gas prices since 2009. Summer travel is expected to be busy, in part due to lower gas prices. About 6 in 10 Americans say they are more likely to take a road trip of 50 miles or more in 2015 if gas prices remain near recent levels, according to a AAA survey. AAA forecast that 33 million people would drive for Memorial Day weekend, which was the highest total in a decade.
CURRENT AND PAST GAS PRICE AVERAGES
Regular Unleaded Gasoline (*indicates record high)
|06/05/15||Week Ago||Year Ago|
|Cape May County||$2.55||$2.52||$3.59|
|Middlesex, Somerset, Hunterdon||$2.56||$2.53||$3.50|
|Monmouth, Ocean Counties||$2.56||$2.54||$3.50|
|Crude Oil||$58.84 per barrel||$60.18 per barrel||$102.48 per barrel|