Dec. 20–In the cyclical world of gasoline prices, the trend now is decidedly pointing lower. And with crude oil prices falling, motorists may see the pattern continue for a few more months.
“Gasoline prices follow the same direction as crude oil prices,” said Bernard “Bud” Weinstein, associate director of the Maguire Energy Institute at Southern Methodist University, “and crude oil prices are down 30 percent from where they were two months ago.”
Thursday the price of West Texas Intermediate — the benchmark price for domestic crude oil — fell 4.8 percent to $45.88 a barrel in New York, and it’s dropped 40 percent since early October.
And while the price of gasoline does not move in lockstep with oil prices, drivers have been getting a break at the pump for going on two months.
AAA of Southern California reported seven straight weeks of falling gasoline prices before a slight uptick this past week, which the Auto Club attributed to refinery and pipeline issues in West Texas and the Pacific Northwest.
In San Diego, the average price of regular gasoline has fallen 22 cents a gallon in the past month — to $3.417 on Thursday.
Nationally, the average price for regular dipped to $2.37 cents a gallon.
“The main reason crude oil prices have dropped is because there’s a glut of about a million barrels a day on the world market,” Weinstein said.
U.S. output is at an all-time high of about 11 million barrels per day. “The U.S shale oil producers, especially in Texas but also in Oklahoma and North Dakota, are producing like gangbusters,” said David Hackett, president of Stillwater Associates, a transportation energy consulting company in Irvine.
And while Russia and the Organization of Petroleum Exporting Countries, or OPEC, recently agreed to slow down production, their deal does not go into effect until the start of 2019.
“And even when they agree to lower their quotas,” Weinstein said, “a lot of them cheat. So the bottom line is there’s too much oil on the market relative to demand, which is pushing down prices.”
Other, ancillary reasons may contribute to lower oil prices.
A general slowing in the U.S. economy may lead to lower commodity prices, such as oil.
And the Federal Reserve’s decision Wednesday to raise short-term interest rates has some analysts thinking it may result in less demand for motor vehicles, which would lead to less demand for gasoline.
“It’s kind of an indirect multiplier effect of higher interest rates,” Weinstein said.
Taken together, oil experts invoke the phrase “lower for longer,” meaning relatively cheaper prices on the horizon — roughly $45 to $50 a barrel for West Texas Intermediate and about $55 a barrel for Brent crude, the international benchmark price.
“I think that’s a pretty good forecast, at least for the short-term,” Weinstein said. “It’s going to take a while because of the excess supply of oil that’s on the market right now.”
Lower gas prices are welcome news for holiday travelers.
The Auto Club of Southern California estimates 8.7 million will take trips of 50 miles or more in the 11-day period including Christmas and New Year’s Day, the highest number since AAA began tracking holiday travel estimates.
“Unemployment is low so people have more household income,” AAA spokeswoman Marie Montgomery said. “They’re feeling good about their disposable income and so they have the money to travel and they’re spending it.”
But motorists know all too well that what goes down can come right back up.
Only one year ago, the average price of gasoline in San Diego was $3.072 — some 34 cents cheaper than today’s prices.
Hackett sees continuing decreases in gasoline prices probably into mid- to late January.
“It’s a Christmas present,” he said. “Think of it that way.”
San Diego area gasoline prices
Current average: $3.417
One week ago: $3.407
One month ago: $3.631
One year ago: $3.072
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