Gasoline Prices Expected To Drop As Much As 50 Cents By Summer

In what is undoubtedly good news for American consumers, the economy, and the Obama Administration, it looks like gasoline prices are heading downward just in time for the summer driving season:

Some relief from suffocating gas prices will likely arrive just in time for summer vacation. Expect a drop of nearly 50 cents as early as June, analysts say.

After rocketing up 91 cents since January, including 44 straight days of increases, the national average this past week stopped just shy of $4 a gallon and has retreated to under $3.98. A steady decline is expected to follow.

It might not be enough to evoke cheers from people who recall gas stations charging less than $3 a gallon last year. But it might help lift consumer spending, which powers about 70 percent of the economy. A 50-cent drop in prices would save U.S. drivers about $189 million a day.

Typically, gas prices peak each spring, then fall into a summertime swoon that can last several weeks. This year’s decline should be gradual but steady, said Fred Rozell, the retail pricing director at the Oil Price Information Service.

Some drivers might not notice much of a price drop at first, Rozell cautioned. When average gas prices fluctuate nationally, some areas are affected more than others. In cities with many service stations, for instance, prices can be slower to fall. It’s even possible prices will rise at some stations in coming days even if they decline nationally.

(…)

This past week, a confluence of factors stemmed the rise in gasoline prices.

Oil, which is used to make gasoline, tumbled 15 percent in price. Investors who were worried about rising oil supplies and falling gasoline demand in the United States helped drive down the price. Oil prices were also responding to a rising dollar. Oil is priced in dollars. So a stronger dollar makes oil less appealing to people buying with foreign currencies.

It was the largest weekly drop for oil in two and a half years. Some analysts predict that oil will keep falling in coming weeks — from about $97 a barrel to about $80.

Many U.S. refineries also are expected to boost production after a series of unplanned shutdowns stemming from power outages and other problems. Those refineries would pump more gasoline to gas stations. And the increased supplies should push down prices.

“It’s going to be $3.50 per gallon this summer,” oil analyst Andrew Lipow said. “At the very least, you can expect prices to fall 40 cents or so over the next several months.”

Finally, some good news for a change.

 

 

FILED UNDER: Economics and Business, Quick Takes, US Politics
Doug Mataconis
About Doug Mataconis
Doug holds a B.A. in Political Science from Rutgers University and J.D. from George Mason University School of Law. He joined the staff of OTB in May 2010 and contributed a staggering 16,483 posts before his retirement in January 2020.

Comments

  1. john personna says:

    Yes, good news. Though, I’m not sure the reasons for falling oil prices are too well understood. I’d feel better if there was some good reason they wouldn’t just go up again.

    On the other hand, “Sounding very much like Ken Deffeyes on Peak Oil, Fatih Birol, chief economist of the International Energy Agency, says world oil production has already peaked.”

  2. Southern Hoosier says:

    This will be a first. Gas prices dropping at the start of the summer driving peak.

    Only 9% Of Americans Blame Obama For High Gas Prices

    If only 9% of Americans think Comrade President can effect gas prices, then he shouldn’t be getting credit for lowering gas prices.

  3. rjs says:

    as recently as 5 days ago. everyone was saying they’d be $5 by summer…did the earth reverse on its axis?

  4. Eric Florack says:

    as recently as 5 days ago. everyone was saying they’d be $5 by summer…did the earth reverse on its axis?

    I’d say that UBL being whacked does have it’s similarities to the earth reversing on its axis, given our dependence on Middle Eastern Oil.
    Now, if we’d get going on domestic production… IE; Get government out of the way, including the EPA, such events would mean little if anything at all in terms of pump price.

  5. reid says:

    Florack: Seems I recall a little oil-drilling environmental disaster not too long ago… ah, screw it, get the EPA out of it! And just how many more barrels will more drilling in US territory add? And how much will that affect our gas prices? Oh, and how exactly will it insulate us from world events? Pardon my scepticism, but this sounds like more idiotic bit-blather.

  6. Peterh says:

    We’re really not very dependent on Middle Eastern oil (Canada being #1 exporter to US), rather I’d say “Prices” are dependent on its flow along with the value of the dollar vs the Euro and other various factors.

    We could, in theory, be 100% self-dependent on the wet stuff, yet economically, not be able to tap it. Well-head cost and volatility mean a lot to lending institutions.

    Saudi Arabia has an estimated well-head cost of under a dollar…..Alaska North Slope has an estimated well-head cost of $13.50…..new deep-water drilling could come in at a cost of $85 per bbl.

    In `86, a lot of corks got put into wells when the Saudis flooded the market and a lot of folks in Houston went broke…..that memory is still there. The “drill, baby drill” mantra is for the ignorant…..and don’t even get me started on renewables such as corn-based ethanol…..

  7. john personna says:

    PeterH, I think your Saudi $ is outdated. I was surprised to see something like $70 quoted as their breakeven these days … though that could have been inclusive of their social spending etc.

  8. john personna says:

    BTW Jim Hamilton at Econbrowser has a great write-up on the origins of the price drop. Can’t link easily from my phone.

  9. Peterh says:

    It is outdated….that was an `85 figure, but just as companies are still profiting from their ANS sunk cost, the Saudis are still profiting from their old reserves…..still…the Saudi pain (raw price) threshold is a lot less than ours….

  10. Ben Wolf says:

    It’s amazing that no matter how many times it is shown that increasing domestic production will lower gasoline prices by maybe two or three cents per gallon, Erik continues to claim otherwise.

    Oh, and somehow getting rid of the EPA so people can dump toxic chemicals in peace will lower prices.

    Also, SOCIALISM!

    I don’t think I’ve ever before encountered someone literally incapable of learning.

  11. Southern Hoosier says:

    Still, there is no guarantee that crude oil prices will not bounce back and a number of risks remain. Libya’s oil production has not been restored and, while U.S. gas demand is slipping because of the higher prices, it is not clear whether it is affecting developing countries’ demands for energy.

    “We can’t know what oil prices will do,” said Lundberg. “The main drivers of oil price increases have not gone away.”

    At $4.50 per gallon, Chicago had the highest average for self-serve, regular unleaded gas, while the lowest price was $3.62 in Tucson, Arizona.

    http://goo.gl/MYSQS

  12. An Interested Party says:

    Still, there is no guarantee that crude oil prices will not bounce back…

    Well, Republicans can only hope, I suppose…

  13. Jay Tea says:

    A $0.50/gallon drop will still leave them about 65% above what they were the day Obama took office, just for reference…

    J.

  14. Eric Florack says:

    Florack: Seems I recall a little oil-drilling environmental disaster not too long ago… ah, screw it, get the EPA out of it!

    Exactly so… get them out of it.

    And just how many more barrels will more drilling in US territory add?

    That depends on the time frame you’re talking about and the restrictions placed on it by the aforementioned EPA.

    PeterH, I think your Saudi $ is outdated. I was surprised to see something like $70 quoted as their breakeven these days … though that could have been inclusive of their social spending etc.

    Given inflationary pressures, that sounds about right.

    It’s amazing that no matter how many times it is shown that increasing domestic production will lower gasoline prices by maybe two or three cents per gallon, Erik continues to claim otherwise.

    Mostly because your data is at least questionable.
    They sound to me like aruments constructed by people who wouod like to see gas prices high… siuch as Obama has stated he’d like to see, for example.

  15. An Interested Party says:

    … siuch as Obama has stated he’d like to see, for example.

    Another right wing lie…unless you can provide the evidence for this claim…

  16. Peterh says:

    Damn bit-breath…..how much time did you put into saying essentially nothin’…..

  17. anjin-san says:

    Well, Republicans can only hope, I suppose…

    And here you have the conservative plan for America over the next 2 years. Pray for high gas prices.

  18. Peterh says:

    “Oil is priced in dollars. So a stronger dollar makes oil less appealing to people buying with foreign currencies.”

    Dumbest statement I’ve ever read…..I doubt an oil analysis would have ever provided that quote to a journalist, so I’m guessing Chris Kahn just pulled that one out of his ass.

    While it is true that oil is priced in dollars….the rise or fall of the dollar has zip to do with the demand of oil no matter what your national currency may be. It just affects the price of the crude, but not necessarily the value of the crude.

    Ever since the Euro popped above the dollar there has been concern that exporting countries would switch to the Euro for pricing which the US was very much against.
    So basically, you’re seeing the differential being factored into the price of oil. In studies, you don’t see it on a one-to-one basis because a host of headlines can effect the price at any given time, but absent of headline trading, there is a trend correlation between the value of the dollar and the price of crude. It’s been more apparent since 2007, but I’ve argued that its been factored in will before then…..

  19. Jay Tea says:

    Technically, Obama didn’t say that he wanted gas prices to “skyrocket.” He said that under his “cap and trade” plan, energy in general would “necessarily skyrocket.” It was his energy secretary who said that our gas prices should be on a par with Europe’s, which are up to about $8.66/gallon right now.

    So no, it wasn’t Obama who said that. It was his hand-chosen Secretary of Energy who said the remark that is entirely consistent with other Obama statements.

    J.

  20. john personna says:

    Jay, it breaks down to this:

    People who want to protect the environment (or national security) recognize the necessity of higher gas prices.

    Those who don’t give a crap, want the lowest prices possible.

  21. John Burgess says:

    The Saudis say they’d be happy with a price around $70-$75/bbl. That means they’d still be okay with it in the $50-$55 range. That would cover their budgetary needs. But then, excepting 1973, the Saudis have always been on the dovish side when it comes to pricing.

    With their new lack of ability to flood the market, though, the hawks like Venezuela, Russia, and Iran are pushing the high prices. They need the money, and they need it now.

    I do think speculation is responsible for at least one-third of current prices, though.

    Locally, I’m seeing prices ranging $3.88-$3.96 today. Oil for here is coming in through the Port of Tampa and is primarily from Mexico.

  22. Wiley Stoner says:

    So the outrageous price of $3.50 a gallon is a good deal? The question will be asked. Are you better off than you were 6 years ago. That is when the donks took over the congress. The congress influenced the last two years of Bush and the rest of Obama. Just what was the price of gas in 2006? You lop eaed libs better figure out which GOP candidate you can live with and make accommodations.

  23. Wiley Stoner says:

    Reid, outside the loss of life because of the explosion, what are the long lasting evironmental damages of that oil spill? Seems there are little creatures in the sea that eat oil. To bad we do not have anything in the air that eats liberals.

  24. john personna says:

    This was pretty easy to find, Wiley:

    Sick fish in Gulf are alarming scientists

    As that story shows, there are a lot of questions. The gulf isn’t terrifically healthy. The questions is why.

  25. John Burgess says:

    @john personna: Sure fooled me! I live on the Gulf and seafood is selling briskly, at even higher prices than last spring. No untoward events are being recorded for the eastern Gulf and the Mote Aquarium–a big research center here–hasn’t found any problems. Sure, I’ll say, ‘Yet,’ just to keep you happy….

  26. mantis says:

    No untoward events are being recorded for the eastern Gulf and the Mote Aquarium–a big research center here–hasn’t found any problems.

    That’s funny. Wait, what’s this?

    ‘Quagmire Of Bureaucracy’ Stifles Gulf Spill Research

    Although images of dead birds and blackened marshes in the Gulf of Mexico are gone, many scientists say it’s too early to declare a recovery. They suspect there could be hidden damage to the Gulf’s marine life and marshes. And some of these scientists say research on the effects of the spill has been delayed or kept secret.

    Among them is Michael Crosby, a senior scientist at Florida’s Mote Marine Laboratory. The Gulf of Mexico is his baby. He was thrilled last year when BP promised to give scientists $500 million to research how the spill will affect marine life in the Gulf.

    Eleven months later, he’s still waiting to see the money.

  27. John Burgess says:

    So, if the reseacher doesn’t get a ton of money he can’t do the research. That’s clear. Whether there’s anything to be researched other than a null hypothesis, though, is still an open question.