Drop in Current Gasoline Prices Expected in Final Quarter of 2012

Current gasoline prices are projected to fall even lower moving into the final quarter of 2012.

After steadily rising from a low of $3.83 a gallon posted last July 2 to a high of $3.87 a gallon in September, the current gasoline price average nationwide has finally started to fall. The highest price for this month was lower by 7 cents compared to the highest year-to-date rate of $3.94 per gallon that was posted last April 5 and 6.

The latest national average for one gallon of regular gas dropped to $3.83 a gallon, a rate that is lower by 4 cents compared to the past week. It is also 11 cents greater versus the past month, 26 cents greater than last year and 28 cents lower than the highest average of $4.11 per gallon posted in July of 2008.

The oil market’s shape significantly changed last week as per barrel crude prices fell from a high of $99 since May this year to a low of $91.98.

Most of the excitement for higher crude prices has faded due to the reality of high stockpiles and the growing realization that the latest Federal Reserve stimulus measures is actually an indication that the growth of the economy is weakening.

Furthermore, Japan has joined the financial scene by announcing that it will provide billions of money to boost its economy. Moreover, there is additional talk of a possible release of Strategic Oil Reserves which some say is arguable since the government needs to utilize some of its crude anyway since it is keeping more than what is required by law.

According to recently released EIA data, crude oil inventory in the United States amounted to 367.6 million barrels, marking an increase of almost 8.5 million barrels. The supply of gasoline had a 1.4 million-barrel drop to 196.3 million barrels. The demand for gasoline saw a minimal fall for the current week compared to the previous week, taking the four-week average to a shortage compared to the same period in the past year.

The demand for gasoline, according to the measurements of the EIA, was 8.362 million barrels daily during the past week, a decline of 63,000 barrels daily, with the four-week moving average lower by 0.9 percent compared to the same period in the past year (each barrel, whether oil or gasoline, contains 42 gallons). The effect of Hurricane Isaac seems to have disappeared as the utilization rates in U.S refineries were 5.2 percent higher, to 88.9 percent.

Analysts think that per barrel crude prices will keep declining in the coming six to nine months, supporting lower gasoline prices. The crude market is sufficiently supplied, and the U.S., Canada and Saudi Arabia have said that they will raise output as needed. But Middle Eastern geopolitical tensions and the financial crisis in the euro zone can affect crude oil in both directions, depending on the circumstances. Moreover, the hurricane season remains a threat until the month of November, thus any storm-related production or refining disruption may push the current oil and gasoline prices higher.

By: Chris Termeer