AAA: Prices Will Likely Average Below $3 a Gallon This Summer

After seeing increases at the pump seven out of the last eight weeks, gas prices actually eased a bit this week on what analysts believe is an inevitable crawl to the $3.00 mark this spring. The national average price for regular grade gasoline held steady at an 18-month high of $2.86 this week. Current prices are 81 cents higher than a year ago, but still $1.25 less than the record high set in July 2008.
This week’s steady gas prices are a result of a slight dip in the crude oil market. Crude oil has slightly backed down from last week’s 18-month high of $87 a barrel all week, however, Friday’s news that U.S. securities regulators charged Goldman Sachs Group with fraud sent crude oil down more than 3% to close the week at $83.24 a barrel. A strengthening U.S. dollar and demand concerns also contributed to this week’s slight decline.
In its weekly report, the Energy Information Association (EIA) showed crude stocks fell 2.2 million barrels to 354.0 million barrels, against a forecasted 1.5 million barrel increase and a 1.4 million barrel increase reported by the American Petroleum Institute (API). Gasoline stocks fell 1.1 million barrels to 223.3 million barrels, far more than the forecasted 600,000-barrel drop and against API’s reported 1.6 million barrel build.
The Weekend
“This week’s steady gas prices came as welcome pause at the pumps for motorists,” said Tracy Noble, Manager of Public and Government Affairs for AAA Mid-Atlantic. “Recent stability and even slight dips in crude oil prices have given pause to costs at the pumps at a time when we typically see continued increases as seasonal demand increases kick in. Although prices will likely continue to creep up to the $3.00 a gallon mark this spring, we’ll take stability while it lasts.”
The Week Ahead
The Energy Information Association (EIA) has revised its summer gas price outlook, forecasting retail gas prices will average $2.92 a gallon during this summer’s driving season (April 1 through September 30), down from its previously forecasted average of $3.00 a gallon, yet still up from $2.44 a gallon last summer. The agency also forecasts the 2010 annual average gas price will be $2.84 a gallon, up from $2.35 a gallon in 2009, and crude oil will average $81 a barrel this summer and slightly less than $81 for 2010 as a whole. In terms of demand, the EIA projects gasoline demand will grow by 0.5% this year versus 2009.

CURRENT AND PAST GAS PRICE AVERAGES

Regular Unleaded Gasoline (*indicates record high)