Drivers in Chicago and other parts of the Midwest may see gasoline prices at the pump fall to 99 cents a gallon as regional stockpiles swell.
Average Illinois retail gasoline prices have dropped 34 percent in the past year to $1.57 a gallon, while Oklahoma motorists can fill up for a $1.36 a gallon, according to GasBuddy Organization. If gasoline supplies keep growing, 99-cent fuel is not out of the question, said GasBuddy, which tracks prices at filling stations.
Midwest gasoline inventories hit a 21-year high during the last week in January, according to government data. Nationwide inventories may have increased as much as 1 million barrels last week, according to the average forecast of seven analysts compiled by Bloomberg. Valero Energy Corp.’s Memphis refinery was said to have recently reduced how much oil it processes as the profit margin from turning crude into gasoline declines, according to two people familiar with operations.
The chance for 99-cent fuel is possible during the next few weeks before the summer driving season begins, Michael Green, a spokesman in Washington for AAA, said in a phone interview. “We may have some stations offering gas below $1 per gallon for marketing purposes, but the chances of a station offering under $1 are going to decrease pretty soon.”
Swelling inventories have pushed Chicago wholesale prices down 59 percent this year to a 14-year low of 50.5 cents a gallon, according to data compiled by Bloomberg. Midwest refiners that took advantage of cheap crude to churn out more product have seen profits collapse in recent weeks.
"We’re getting to the point where supplies will peak in the next couple of weeks," said Phil Flynn, senior market analyst at Price Futures Group in Chicago, by phone. As inventories rise ahead of refineries’ spring maintenance season, more refiners may reduce runs like Valero, he said.
“Instead of getting into a situation where they lose money, they’re going to cut back production until supplies get back in line,” said Flynn. “There will be others that follow Valero.”
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