AAA: Crude Oil Falls Nearly 10% In August

Recent losses in the crude oil market have trickled down to gas prices this week, as the national average price for regular grade gasoline dropped five cents this week to $2.72 a gallon Friday – 10 cents higher than the same date last year, but still $1.39 less than the record of $4.11 set two summers ago. Unlike the record high prices of summer 2008, this summer’s gas prices have remained relatively stable, settling in the $2.70 to $2.78 range since Memorial Day weekend. Considering analysts had speculated prices could shatter the $3.00 mark early in the summer driving season, gas price stability has undoubtedly been welcome news for motorists.
For the second consecutive week, crude oil prices have fallen following continued signs of slow economic recovery. Oil prices have fallen nearly 10% from early August highs close to $83 a barrel, trading back in the $70 to $80 range where they have been for most of the past ten months. Crude oil’s decline can be directly attributed to less than favorable economic news from the U.S. and abroad. Jobless claims rose to their highest level in nine months last week, increasing concerns about the pace of recovery in the U.S. Crude oil closed the trading week at 73.46, within the predicted $73 to $76 a barrel short term range by many analysts.
In its weekly report, the Energy Information Administration’s (EIA) data showed crude oil stocks fell 818,000 barrels to 354.2 million barrels, a stunning contrast to the American Petroleum Institute’s (API) report of a nearly 6 million barrel build. Gasoline stocks were virtually unchanged, falling 39,000 barrels. The EIA also reported gasoline demand rose 223,000 barrels per day (bpd) to 9.459 million bpd.
The Weekend
“The summer driving season is winding down. With two weeks remaining until the Labor Day weekend, motorists continue to benefit from a remarkable pattern of gas price stability this summer,” said Tracy E. Noble, AAA Mid-Atlantic spokesperson. “Recent crude oil declines and sluggish economic recovery continue to impact prices at the pump, and this week we saw a five-cent drop in prices at the national level. This is welcome news as we approach the end of the summer driving season.”
The Week Ahead
Despite a reported brisk summer driving season, most recently demand over the last four weeks has topped the same period in 2009 by 3.5%, EIA data has shown a significant crude oil stock build. Year-to-date demand is up a more nominal 0.5%. However, September will determine whether the recent demand “lift” has been purely seasonal or whether a large portion of the rise can be attributed to economic recovery. If post-Labor Day demand reverts closer to the year-on-year growth level, refineries could have difficulty moving inventory.

              CURRENT AND PAST GAS PRICE AVERAGES

              Regular Unleaded Gasoline