AAA: Prices At The Pump Continue to Drop

Memorial Day weekend officially marked the start of the summer driving season and motorists who took to the road last weekend, and into this week, were certainly pleased to see prices at the pump continue their decline. Gas prices have dropped 20 cents from the May 6th high of $2.93 a gallon to $2.73 Friday, a remarkable feat considering that the 30 day period between May 1 and June 1 is normally when the price of gas soars to the highest level of the year as refineries and stations switch to the federally mandated summer gasoline blends. Since the start of the Memorial Day weekend, gas prices have fallen 3 cents, yet prices remain 19 cents higher than last year and $1.38 less than the record-breaking price set in July 2008.
After collapsing by more than 20% from a 2010 high above $87 a barrel in early May, crude oil prices have rebounded in the past two weeks to trade in the $70 to $74 range. In an abbreviated trading week oil prices experienced some volatility in response to varying economic news. Strength in the U.S. dollar and positive signs of a growing economy domestically, coupled with concern for international financial issues in Europe and China, have contributed to oil’s see-saw trading this week. Crude closed the week at $71.51.
Weekly data from the Energy Information Administration (EIA) showed crude oil stocks fell 1.9 million barrels to 363.2 million barrels, far more than the expected 100,000 barrel dip. Gasoline stocks declined 2.6 million barrels to 219 million barrels, also less than the forecasted 500,000 barrel dip. The EIA also released demand data that could represent the best evidence so far this year that the U.S. is beginning to show signs of economic recovery. Total demand for all petroleum products crossed the 20 million barrel-per-day (bpd) mark last week for the first time since January 30, 2009. Demand is still more than 1 million bpd short of typical levels seen in 2007, but the U.S. used about as much fuel last week as they did in the lead-up to Memorial Day 2008.
The Weekend
“The summer driving season is upon us and motorists are certainly taking advantage of declining prices at the pump,” said Tracy E. Noble, Manager of Public and Government Affairs for AAA Mid-Atlantic. “Gas prices have dropped 20 cents in the past month, which is good news for motorists. And on the global front, if economic troubles continue in Europe and China, it’s unlikely the highly-predicted $3.00 a gallon peak summer gas price will manifest itself at all.”
The Week Ahead
Analysts continue to monitor efforts to contain and clean up the oil spill in the Gulf of Mexico. To date the spill triggered by a deadly explosion has yet to affect crude oil prices or the movement of tankers in or out of Gulf ports. Also, hurricane season is underway and the National Hurricane Center is predicting an “active to extremely active” season in the Atlantic. Experts are projecting a 70% probability of 14 to 23 named storms, including 8 to 14 hurricanes, of which 3 to 7 could be major hurricanes. If this holds true, this season could be one of the most active on record, surpassing the 2005 season when hurricanes Katrina and Rita severely disrupted U.S. oil production, refining and consumption by crippling the Gulf of Mexico refining facilities.

CURRENT AND PAST GAS PRICE AVERAGES

Regular Unleaded Gasoline (*indicates record high)