TAMPA, Fla. (August 16, 2015) — The price of oil is on its longest weekly slump of the year, after reaching the lowest closing price since the ‘Great Recession’. This continues to put downward pressure on the price of gasoline, which dropped another 2 cents last week in the southeastern U.S.
“There continues to be a surplus amount of oil in the global market which is expected to keep prices of both oil and gasoline on the low end through the rest of this year,” said Mark Jenkins, spokesman, AAA – The Auto Club Group. “Gas prices did not fall as fast last week as they have in recent weeks, but that is to be expected because we are still in the middle of the peak driving season. Gas prices should fall even faster in the fall when school is back in session.”
Last week, the price of oil reached its lowest closing price since March 3, 2009. On that day, the price of oil was $41.65, and gasoline averaged $1.98 in Florida, $1.84 in Georgia and $1.81 in Tennessee. Of course, gas prices did not reach those lows overnight. In September 2008, in the midst of the Great Recession, the price of oil set a new record high of $120.92 a barrel. From there, it plummeted, reaching its low-point for that period of $33.87/b after only three months. During that time, the national average price for gasoline sunk from $3.74 to $1.67.
“This just proves how big of an impact oil can have on the price of gasoline. Though it is unclear just how low gas prices could go, history tells us that gas prices have the potential to drop below $2 a gallon when oil is as inexpensive as it currently is,” Jenkins said.
Refinery Outage Causes Pump Price Hike
However, the steady decline in gas prices hit a snag late last week. Prices in the southeast U.S. inched up a half cent Friday due to a refinery outage in the mid-west. The largest refinery responsible for providing fuel to the Great Lakes region and the Central United States, experienced an unexpected shutdown. So fuel is being purchased from surrounding regions to supplement the demand, causing supplies to somewhat tighten, leading to a minor impact in pump prices.
“The refinery outage could last a couple weeks, but is not expected to have a dramatic affect on prices in the southeast.”
U.S. Government Forecasts Price Declines
The U.S. Government released new data last week forecasting monthly average gasoline prices ($2.75) to decline from their July level to an average of $2.11/gal during the fourth quarter of 2015. The EIA forecasts U.S. regular gasoline retail prices to average $2.41/gal for all of 2015. So far this year, the price of gasoline has averaged $2.50.
Oil is trending down due to concerns about lower economic growth in emerging markets, expectations of higher oil exports from Iran, and continuing actual and expected growth in global inventories.
The EIA forecasts that West Texas Intermediate (WTI) crude oil prices will average $49/b in 2015 and $54/b in 2016. The current values of futures and options contracts for November 2015 delivery suggest the market expects WTI prices to range from $34/b to $64/b in November 2015. This forecast assumes the Iranian Nuclear agreement is implemented and sanctions relief occurs, putting additional Iranian oil supplies on a global market that has already seen oil inventories rise significantly over the past year.
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