Drivers Get Summer Break As Gas Prices Take A Plunge

Prices Take Biggest Weekly Dive Of 2014

Gas price trend for week of July 28, 2014The 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?

Retail gas prices move with wholesale and crude prices, but the charts above show consumer prices appearing to lead the trends instead of following in recent months.

Retail gas prices move with wholesale and crude prices, but the charts above show consumer prices appearing to lead the trends instead of following in recent months.

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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About Danny Pryor

Danny Pryor is a media, content and web developer with a long history in broadcast and print journalism. He is also the executive director of Turnpike Information Company. Danny has earned two awards from the Associated Press for his work in media, including Best Individual Achievement for Large Market Radio in Miami. He resides in Fort Lauderdale, Florida.