Tags: 3 | Gasoline | Holiday | Oil

$3 Gasoline in Sight for US Holiday Season as Oil Prices Sink

Sunday, 12 Oct 2014 11:50 AM

U.S. drivers are closer to seeing $3 gasoline over the holiday season than they’ve been in four years as New York-traded futures are selling for $1 a gallon below retail prices, signaling further declines at the pump.

Gasoline for November delivery settled Friday at $2.2575 a gallon on the New York Mercantile Exchange, 98.25 cents below the pump price, according to Heathrow, Florida-based motoring club AAA. That’s the biggest gap since October 2012, which was the last time the discount topped $1. The futures, which help dictate retail costs, have dropped about 40 cents in the past two weeks while prices at the pump are down 10 cents.

The widening spread indicates that filling stations have yet to match declines in futures, according to Michael Green, an AAA spokesman in Washington. The group has projected that retail prices will fall below $3.10 a gallon and may reach $3 by the time drivers hit the road for the end-of-year holidays.

“It’s possible that we see an average Thursday. “We wouldn’t be surprised if retail prices dropped another 20 cents a gallon by the time you load your car up for Thanksgiving” on Nov. 27.

Prolonged declines in gasoline futures typically take two to three weeks to translate into lower pump prices as individual gasoline stations adjust their pricing, Green said. U.S. retail prices averaged $3.24 a gallon Thursday, data compiled by AAA show. The last time the nationwide price was below $3 was in December of 2010.

Filling Stations

“If you’re the owner of a gas station, you’re paying lower wholesale prices now, but there’s no guarantee they’ll continue to drop,” Green said. “They have little motivation to cut their prices unless futures remain where they are. Then some gasoline station owner will lower prices and competition will kick in and it’ll turn into lower prices for everyone.”

Gasoline is sliding as oil prices trade at the lowest levels since 2012. U.S. output of crude, which makes up about two-thirds of the cost of gasoline, has surged to a 28-year high as drillers pull record volumes out of shale formations from North Dakota to Texas. The domestic boom has contributed to a glut of light oil as global demand growth slows.

U.S. refiners are cashing in on the cheaper domestic supplies by processing the most crude for this time of year since at least 1989, according to data from the Energy Information Administration, the Energy Department’s statistical arm.

Below $3

Gasoline prices in Missouri fell below $3 a gallon earlier this week, becoming the first state with an average under $3 since Jan. 23, AAA said Oct. 7. Almost 10 percent of U.S. stations were selling the motor fuel for less than $3 a gallon at the time, the group said.

The EIA lowered its retail gasoline forecasts on Oct. 7, projecting that prices will bottom out at $3.14 a gallon in December, 4 cents lower than its previous outlook, T. Mason Hamilton, a petroleum markets analyst at the agency in Washington, said by telephone Friday.

“Of course that’s because of lower crude prices,” Hamilton said.

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U.S. drivers are closer to seeing $3 gasoline over the holiday season than they've been in four years as New York-traded futures are selling for $1 a gallon below retail prices, signaling further declines at the pump.
3, Gasoline, Holiday, Oil
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2014-50-12
Sunday, 12 Oct 2014 11:50 AM
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