Daily Archives: October 8, 2013

Government Shutdown May Help Gas Prices, But At What Cost?

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The price of gasoline continued falling across every region of the United States this past week, with the price of a gallon of unleaded fuel falling an average of 6¢ per gallon, on a nationwide level, to $3.37. The price data are included in this week’s survey from the U.S. Energy Information Administration. Various regions had differing levels of price change, which is normal. What is somewhat unusual is the relative equanimity found in those price declines, from one region to the next. Drivers on the West Coast, not including California, found the price of gas down by about 4¢ per gallon, while the largest price declines came in the Midwest, where the cost for fuel dipped by about 7¢.

The drop in prices has been welcome relief for drivers. Most of the gas prices across the U.S. spiked in June and July. Another spate of price increases happened during mid and late August, all against the backdrop of supply problems in Libya and the potential for a military showdown in Syria. The focus of the next potential price disruption is already being seen in Egypt and Libya, this in the wake of a pair of covert operations in Africa over the weekend. U.S. special forces captured a wanted Qaeda leader in Libya, while another warlord was being sought in Somalia.

Oil futures graphic

Gas prices could be chained upward pressures due to geopolitical instability, even though domestic politics should bring down consumer demand and prices at the pump. Graphic: PhotoDune.net

Continued political unrest in Egypt, combined with the military operation in Libya, have caused futures traders to fear supply disruptions in those areas. Crude oil futures have been going back up in recent days, this after trading lower through most of September.

Sans the geopolitical instability in the Middle East, crude oil might be heading lower, this over fears of lower consumer demand in the face of a lingering government shutdown. Supplies from the North Sea have, at least, kept some price control on crude futures. North Sea crude is expected to reach peak supply levels in November.

Even amid the potential for short-term price increases, the longer-term trend has been one of extraordinary price declines. Overall, U.S. gas prices are down nearly 13% from their levels at this time last year. The average price of a gallon of uneaded, in early October 2012, was about $3.86.

Diesel car drivers and truckers are also paying less, both year over year and week over week. The average price of a gallon of diesel fell by 2¢ in most regions, with prices in the Central Atlantic and West Coast areas down by about 3¢.

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