Month: July 2014

Prices Take Biggest Weekly Dive Of 2014

The cost of a gallon of unleaded gasoline plunged by an average of five cents last week, according to the latest survey from the U.S. Energy Information Administration. The E.I.A. weekly report shows prices fell in nearly every region, with the exception of the Rocky Mountain states, where prices were either flat or slightly higher. Overall, the average price of a gallon of unleaded gas, on a nationwide basis, now stands at $3.54, but prices along the Gulf Coast, the cheap spot for gas, are now averaging just $3.35. Along the West Coast, where prices are the highest, the gas price average stands at $3.92 per gallon. The biggest weekly price declines came in the Midwest, where the cost of fuel dipped by about 9¢ per gallon over the past week.

The weekly price drop marks the fourth consecutive week of declining gas prices, the first time that has happened since January. In all, prices have dropped about 16¢ per gallon, on average, since the end of June. Region by region, however, the price differential is substantial, with drivers in the aforementioned Midwest enduring significant volatility, while those living in on the West Coast and California paying substantially higher prices than most of the rest of U.S. drivers. Even so, the official gas price has finally come below $4.00 per gallon in California, although most city drivers are not yet enjoying that price point.

Are Consumer Gas Prices Breaking From Wholesale Gas And Crude Futures?

An interesting trend to observe is the corollary between the cost of oil futures and the prices of wholesale and retail gasolines. While domestic crude oil prices are much higher this year than at the end of summer 2013, the price of gas is actually, from a statistical standpoint, close to the same as 11 months ago. In fact, average U.S. gas prices through August 2013 fluctuated between $3.55 and $3.65 per gallon last year, when West Texas Intermediate was trading in a range between $93 and $96 per barrel. For July 2014, the price of gas has been averaging within same range as August 2013, but the price of WTI has been trading much higher on the New York Mercantile Exchange.

In fact, WTI has been trading between $100 and $108 per barrel, swayed heavily by investors who are jittery about geopolitical instability in various hotspots around the globe. Brent Light Sweet Crude, which also plays an impact on U.S. gas prices, traded between $100 and $105 per barrel in August of 2013. During the past 30 days, Brent has traded between $107 and $113 per barrel.

The interplay between crude oil and wholesale gas prices is unmistakable. Crude stocks, refinery costs and distribution all affect the wholesale price of refined motor fuels. However, when the one-year trend charts are juxtaposed, it is clear the retail gas prices have not fluctuated nearly as wildly as wholesale and crude prices. Moreover, there appear to be times when the retail prices appeared to fall ahead of a decline in wholesale and futures costs. Conversely, this summer’s price increases appeared to come ahead of similar fluctuations in wholesale and crude.

Consumer Demand Likely To Lead Prices In Coming Weeks

A coming decline in consumer demand is most likely to play the largest role in retail gas prices during August. The end of the summer driving seasons has already started for most travelers, particularly those with children who will be returning to school in the coming weeks. With the lower consumer demand, retail gas prices will continue to decline somewhat during August or, at worst, level off and remain steady through the month. However, continuing tensions in the Middle East and in Europe could destabilize crude futures heading into the autumn, which may lead to higher-than-usual prices after the start of school, a time when prices typically decline.

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Price Declines Come Amid New Global Turmoils

While the world watches two intense dramas unfold in Europe and the Middle East, the geopolitical instability seemed to have little immediate impact on gas prices, and consumers across the country enjoyed a refreshing, large decline in the price of retail gas. The latest survey from the U.S. Energy Information Administration shows the price of an average gallon of gas dropped over 4¢ during the past week, settling in below $3.60 for the first time since the beginning of April, at least on a nationwide basis. Region by region, the average price of gas is no longer exceeds $4.00 in any survey area. That is the first time that has happened in three months. In some areas, the retail fuel cost is now less than $3.40.

The news is particularly good across the West Coast, where prices had been stubbornly above the $4.00 mark for month. However, California drivers have not been spared the pain of that dubious price point just yet. Drivers in the Golden State are still paying an average $4.03 per gallon, but that is 10¢ cheaper than two weeks ago. Moreover, the recent retreat in crude oil prices and a decline in wholesale prices have both contributed to a turn-around in prices at the retail level, which have been, for the most part, pushing higher since the start of the year.

In other regions, the cost of gas dropped below $3.40 for the Gulf Coast, where prices are typically the lowest in the nation. Prices in the Lower Atlantic states dropped below $3.50, while prices across the broader East Coast dipped under $3.60.

City Prices Typically Remain Above Regional Averages

For city drivers, the price of gas remains above their regional averages. While the prices in the urban cores have come down, along with the national averages, the range across a single city can still vary widely.
Prices near the downtown Fort Lauderdale area were at $3.79 per gallon, although that was 10¢ cheaper than one week ago. Near the airport, and along Florida’s Turnpike, the prices were lower, but still well above the regional and state averages.

In Texas, which is part of the Gulf Coast region, the price of gas was slightly higher than the region, itself. TurnpikeInfo.com spotters found prices at some stations adjacent to Texas toll roads where prices were in line with the regional averages. Closer to Austin, the prices are historically higher, especially adjacent to the Capital of Texas Highway and near Austin-Bergstrom International Airport.

Global Political And Military Flash Points Could Turn Gas Prices Upward

The drop in gas prices comes amid new turmoils in Ukraine and in the Middle East. In fact, before renewed tensions in the past week, domestic crude oil prices had been coming down. Investors seemed to be assured there would be little supply disruption as the result strife in Iraq. However, newly-intensified U.S. sanctions on some Russian companies and individuals added new strain to relations between the two nations in the ongoing situation in Ukraine, and that was before the downing of a Malaysian Airlines jet last week. Then there is Israel’s military actions in Gaza, which expanded the range of Middle East territory now engulfed in military turmoil. The Middle East has vacillated from one crisis-level to the next since last summer, when the potential for a U.S. intervention in Syria was first seriously discussed. Problems in Libya, Iran, Iraq and now Israel have fomented and renewed political discord and, as a result, investor jitters about crude oil supplies.

The result is fresh concern about oil supply disruptions, which has caused investors to bid West Texas Intermediate contracts back above the $100 level. Prices had traded below $100 as recently as one week ago, but WTI futures were trading over $105 per barrel at times Tuesday morning on the New York Mercantile Exchange. The current contract bids are for August delivery.

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Finally, Summer Driving Gets A Bit Cheaper For Vacation Travelers

The cost of a summer drive finally relaxed a bit during the past week as the price of a gallon of gas retreated just about 4¢, according to the latest survey from the U.S. Energy Information Administration. Prices took their most significant week-over-week decline since early November, 2013, and this week’s price drops marked the first time all year that retail gas prices have declined significantly for two consecutive weeks.

Prices dropped in nearly every region, but drivers the Rocky Mountain states did not get a price break this week. Both California and the broader West Coast region enjoyed a dip in pricing, while the volatile Midwestern markets enjoyed another week of steep declines that brought prices down, on average, nearly 8¢ per gallon.

Regional Price Averages Impacted By Their Metro City Prices

Once again, individual, larger cities across the Midwest contributed significantly to the regional average’s price declines, which also impacted West Coast averages this week. For instance, the E.I.A. report shows the price of gas dropped by 10¢ in Chicago and by almost 11¢ in Cleveland, pulling the broad Midwestern price averages down. For the West Coast, particularly in California, price declines from Seattle to San Francisco and Los Angeles contributed significantly to the overall regional dip in fuel costs.

Crude Oil Retreats Below $100 As Production And Supply Go Up

The crude oil outlook is finally beginning to favor consumers, with the price of West Texas Intermediate Crude finally trading below $100 per barrel, the first time that has happened since the beginning of May. Prices spiked during June and into early July on overseas supply concerns and a drop at stocks at the Cushing, Oklahoma crude storage facility.

However, geopolitical concerns abroad, notably in Iraq and Libya, have begun to ease, and the crude oil supply in the United States is high, despite the lower supplies at Cushing. Many refineries are able to bypass Cushing, Oklahoma, with new pipelines bringing crude stock directly to the refineries, themselves.

In the meantime, oil production in the United States is at its highest level in 28 years, according to a Bloomberg News report, which cited an separate E.I.A. survey that tracks domestic energy output. The E.I.A. report of July 9 showed crude production in the U.S. had hit 8.51 million barrels of oil per day, which is the highest it has been since October, 1986.

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Editor's Note: This week's report is being filed from Chicago, where we are on the road for a video shoot of the toll roads across the Midwest. As a result, the report will be abbreviated.

The price of gas did not move much during the past week, according to the latest weekly survey from the U.S Energy Information Administration. In fact, on a nationwide basis, the average price of gas did not move at all, remaining $3.70 per gallon.

However, regional price fluctuations did impact consumers, particularly in California and across the Midwest, where pricing volatility is the norm. For the Midwest region, the price of gas dropped about 2¢ per gallon on the week, while in California, the price of a gallon of regular unleaded pushed upward by 3¢, dragging the broader West Coast region with it. For consumers in the Gulf Coast states, the price of gas dipped by about a penny, after coming close to the $3.50 threshold.

Examined on an annual basis, however, the price of gas is significantly higher for most of us. Only drivers in the Rocky Mountain states have escaped the punishing price increases that have impacted the rest of the nation. In fact, the cost of gas is about a penny lower than last year. That price decline may seem trite, but it is significant when compared to other regions, where the cost of gas jumped dramatically.

For instance, in the Midwest, the gas prices are 28¢ per gallon higher this year, led by Ohio, where prices are about 39¢ higher than last summer. For the West Coast, which includes California, the price of fuel is about 17¢ per gallon higher. Even on the Gulf Coast, where the cost of driving is typically the lowest in the nation, retail gas prices are 17¢ per gallon higher. On a nationwide basis, the cost of fuel averages 21¢ more than at this time in 2013.

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