Pump prices poised for biggest monthly drop since 2008
U.S. retail gasoline is heading for the biggest monthly drop since the country was in the midst of the worst recession since the 1930s, as global oil demand stagnates and crude prices fall.
The daily national average for gasoline has slipped 32.3 cents so far in October to $3.01 yesterday, according to data from Heathrow, Florida-based auto club AAA. That's the lowest since December 2010. Prices are down 9.7 percent this month, poised for the steepest percentage decline since December 2008.
Motorists are benefiting from the combination of U.S. crude production at the highest level in at least three decades and weak demand that's caused oil prices to drop 23 percent since June.
Retail gasoline prices are expected to drop another 15 to 20 cents before leveling off around Thanksgiving and remaining steady through the winter, Andy Lipow, president of Lipow Oil Associates LLC in Houston, said in a telephone interview.
"The forecast for increased demand for oil around the world has been lowered over the last four months, changing the perception for the oil markets to one of oversupply in light of rapid growth of production in the U.S. and Canada," Lipow said.
The difference between 2008 and 2014: Oil prices have fallen fast now and "it's led to a significant decline in gasoline prices in a short period of time," Lipow said. That's good news for the consumer, and is coming at a time when the economy continues to show signs of recovery.
Gasoline prices have been falling in all regions of the country, with the biggest recent declines on the West Coast and the smallest recent drop in the Midwest, the Energy Information Administration said Oct. 27 in its weekly Gasoline and Diesel Fuel Update.
West Texas Intermediate crude, the U.S. benchmark priced in Cushing, Oklahoma, dipped below $80 a barrel on Oct. 16 for the first time since June 2012. It was down $1.12 at $81.08 at 11:50 a.m. New York time.
U.S. crude production rose 0.4 percent to 8.97 million barrels a day last week, according to weekly EIA estimates that began in January 1983. The EIA's monthly data, which goes back to 1920 and is based on data collected by state and federal agencies, shows production at the highest since 1986.
Gasoline stockpiles fell 1.2 million barrels, or 0.6 percent, in the seven days ended Oct. 24 to 203.1 million, EIA data show. Gasoline futures on the New York Mercantile Exchange fell 2.37 cents, or 1.1 percent, to $2.197 today.
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