Prices Below $2.00 Per Gallon In Some Areas
The price of gas continued its precipitous decline during the past week, falling an average of 15¢ to settle at $2.40 per gallon. The figures are detailed in the weekly gas price survey from the Energy Information Administration, a branch of the Department of Energy. In some regions, the price of gas is so low it is closing in on the $2.00 per gallon level, and for a few lucky drivers across the Gulf Coast, the price is actually below that threshold for the first time in several years.
This week’s price decline is so dramatic, it underscores the close bond between the price of consumer gas and the futures markets. Crude oil futures are down by half since the middle of the summer, when gas prices were averaging about $3.70 per gallon, nationwide. Since then, domestic crude oil, West Texas Intermediate, has fallen from a high near $105 per barrel down to close at $56.22 on Tuesday.
WTI has been trading between $50 and $60 per barrel for the past two weeks, ever since it close under $60 on December 11. Brent Light Sweet Crude, the overseas benchmark, is also down substantially in the past six months, from $111 per barrel at the end of June to $60.68 on Tuesday. Brent has closed under $60 twice in the past ten days.
As Goes Crude, So Goes Retail Gasoline
The question of how low prices will go is a point of contention among energy analysts, but the general mood is that the current glut in oil will likely last well into 2015. A report on Bloomberg news this morning details the trio of issues that have converged to impel the biggest yearly drop in oil prices since the Great Recession began in 2008. Those factors are high output by the United States, where the shale boom has help production rise to its highest levels in 30 years, continued high output by OPEC nations, and a slowing global economy that will continue to reduce worldwide demand in the coming months.
While the U.S. economy is growing at a fairly good pace – the Commerce Department reported gross domestic product rose at an annualized 5 percent rate during the third quarter – market watchers from Europe to the U.S. agree the rise in American demand for gas is not enough to offset the lower demand overseas.
While much of what happens in energy markets may seem esoteric to the average consumer, the corollary between crude and retail gasoline is unmistakable. Particularly in the face of high domestic production, drivers are not likely to see gasoline prices reversing course any time soon. Brent and WTI futures for February delivery are not any higher than the January contracts, which are influencing the price of gasoline today.
Diesel Prices Also Down, More Consistent From Region To Region
That price of gas has fallen $1.30 in the past six months, but the price of diesel has also come down substantially in the past six months, although the declines have not been quite as dramatic as retail gas. Diesel prices, on average, fell 14¢ per gallon last week to settle at $3.28 per gallon. As with regular automotive fuels, diesel prices vary region by region, but the disparity from one section of the nation to the next is not as dramatic as with unleaded gas.
For instance, the lowest prices for gasoline are found along the Gulf Coast, where the average consumer is paying about $2.18 per gallon. The highest average price, by survey region, is the West Coast, where prices are still about $2.70 per gallon. That is a range of 52¢. On the other hand, diesel’s highest prices are presently found on the East Coast, where the cost is $3.43 per gallon in the New England states, higher than California, where the price averages $3.41. The lowest cost is across the Gulf Coast, where prices for diesel are about $3.18. That puts the range for diesel at only 33¢; the fact diesel is more costly than unleaded gas also means that, mathematically, the cost of the fuel is more consistent from region to region.