Prices at the pump have fallen again, but the summer decline is mostly over, according to industry watchers.
Gasoline prices fell again on Aug. 19 with the national average declining to $3.89 a gallon as crude oil prices inched slightly higher to $91.56 a barrel.
The most common price is $3.49 a gallon, Patrick De Haan, head of petroleum analysis at GasBuddy, the Boston provider of retail-fuel-pricing information, told TheStreet. The cheapest 10% of stations are selling gasoline at an average of $3.22 a gallon and the median price now is $3.72 a gallon. Diesel sells for $4.996 per gallon.
Consumers received a slight break for the past two months from higher gasoline prices even as inflation in energy, housing and food costs has eroded income from wages.
“Americans today will spend $430 million less on gas than we did in mid-June,” he said.
Drivers should not count on gasoline prices falling for more than a few weeks.
“I think we’re in the last inning or so of decline for the time being,” De Haan said. “We may stabilize just under $4 a gallon for the time being, but there’s a lot of economic data that could nudge us one way or another.”
Some regions in the U.S could see further price cuts such as the West Coast since their declines have been smaller compared to the south and Midwest, he said.
Peak Gasoline Demand Ends
The peak of demand for gasoline has ended, De Haan said. The volume of gasoline sold has declined every day this week except for Thursday compared to a week ago.
Gasoline prices have declined since peaking at $5.03 on June 14. They have decreased by more than $1 per gallon, mirroring the decline and volatility in crude oil prices.
On Aug. 4 crude oil prices fell to their lowest level since before Ukraine was invaded by Russia in late February. West Texas Intermediate reached $88 a barrel while the international benchmark, Brent crude, fell to $95 a barrel.
Crude oil prices have been volatile as news of China’s weaker economic growth brought WTI lower, earlier this week.
Economic data such as lower inflation could actually increase consumer confidence, resulting in more demand for gasoline.
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“In addition, positive economic data could bring optimism and lead to a rise in demand, while bad economic data could lead to the opposite,” De Haan said.
Gasoline Prices Dip in the Fall
Prices for gasoline decrease during the fall months because demand drops, consumers tend to drive less and winter gasoline is cheaper to manufacture.
Gasoline prices are past their summer peak and refiners will start producing gasoline specified for winter months. Those formulations are easier to make because of the products that are used to blend crude oil and also costs less, Richard Joswick, head of global oil analytics, S&P Global Commodity Insights, told TheStreet. He expects that Brent crude prices “will land below $100 before the end of the year.”
Refiners switch to producing cheaper winter gasoline by mid-September, De Haan said.
“Demand cools off and motorists have less draw to get outdoors as temps drop,” he said.
Mid-term or presidential elections have no correlation to gasoline prices and there is no “conspiracy,” De Haan said.
Hurricane Season Could Impact Prices
Peak hurricane season is around the corner and begins toward the end of August, which could impact production and refining capacity.
A big storm “could disrupt oil production in the Gulf as well as refiners in the region, should a major hurricane head for the area,” De Haan said.
A major hurricane making landfall along the Gulf Coast could result in a $10 spike in oil prices, pushing up gasoline prices up by $0.25 a gallon, Rob Thummel, senior portfolio manager at Tortoise in Overland Park, Kan., told TheStreet.
An outage at refineries could push gasoline prices back into the mid $4s, he said.
The Colorado State University predicts an active hurricane season and estimates 18 named storms, eight hurricanes, and four major hurricanes that are Category 3 or higher.