Tags: Lutz | gas | ethanol | prices

Stifel's Lutz: Gas Prices Seen Dropping Below $3 Per Gallon

By    |   Wednesday, 16 October 2013 10:30 AM

Average gas prices could slump below $3 per gallon by the end of 2013 because of changes in the federal ethanol mandate, according to David Lutz, managing director and head of exchange-traded fund trading at Stifel, Nicolaus & Co.

In an interview with Yahoo, Lutz predicted the Environmental Protection Agency (EPA) is about to make adjustments to ethanol rules that Yahoo described as having been a "stealth tax on American drivers for years."

Federal law since 2005 has forced refiners to blend ever-rising amounts of ethanol into gasoline. But demand for gas has been in decline and an overwhelming majority of American cars do not work with gas that is more than 10 percent ethanol, which is the level now seen at many gas pumps.

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The EPA has forced refiners to buy credits for ethanol production, which has artificially pushed up refining costs, but the cost of those credits is falling, Lutz explained.

"I'm not going to be stunned if we see gas prices going below $3 by the end of the year," he stated. "That's going to be a heck of a tailwind going into the holiday shopping season."

Gasbuddy.com reported the nationwide average price of gas was $3.37 per gallon last week — down 40.7 cents from a year ago and a decrease of 17.9 cents from last month.

According to AAA, the average price for regular unleaded gasoline was $3.34 per gallon at the beginning of the week. This price is fractions of a penny less expensive than one week ago, 19 cents less than one month ago and 45 cents less than the same day last year.

Gail Weinholzer, a spokesperson for the AAA, said there multiple reasons for the price decline.

"There's a lot of things that go into the equation. It's not just a simple thing," she told a CBS station in Minnesota.

Weinholzer explained that the Syrian civil war has subsided in world attention, and oil regions seem more stable as a result. The absence of major hurricanes in the Gulf of Mexico this year has also helped, she said.

But Weinholzer predicted further large drops in pump prices might be unlikely.

"We may see a continued decline," she said, "A nickel, a dime, a slight decline, I don't anticipate a significant decline."

A CBS station in Philadelphia reported gas prices at some stations in New Jersey actually hit $2.99 per gallon this week. Similarly, The Wichita Eagle reported gas prices briefly touched $2.99 per gallon in Omaha, Nebr., last week before going back up.

Editor’s Note: Seniors Scoop Up Unclaimed $20,500 Checks? (See If You Qualify)

Related Stories:

AAA: Gas Has Been Over $3 a Gallon for 1,000 Days and Counting

Gas Prices Dropping, Could Hit as Low as $3 a Gallon, Experts Say

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Average gas prices could slump below $3 per gallon by the end of 2013 because of changes in the federal ethanol mandate, according to David Lutz, managing director and head of exchange-traded fund trading at Stifel, Nicolaus & Co.
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2013-30-16
Wednesday, 16 October 2013 10:30 AM
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