Cheaper global and domestic crude oil prices have pushed costs for North American refiners lower despite violence in the Middle East and uncertainty about long-term Russian energy supplies. U.S. benchmark crude oil futures, for example, are down nearly $9 barrel from where they stood ahead of Memorial Day weekend, and the price of international North Sea crude (Brent) has declined by about $7 barrel. The crude drops have combined with record high summer refinery runs that have so far brought 26cts gal of summer price relief at the pump. Prices may stabilize in the next three weeks, but should then give way to hefty decreases in the second half of September and all of October.
“We expect to see stable gasoline prices from now through mid-September,” said GasBuddy chief oil analyst Tom Kloza. “Some more significant declines could come after September 15 when the ‘recipe’ for gasoline changes in most states. By Veterans’ Day, we anticipate that much of the country could be looking at average prices below $3.25 gal with thousands of stations under $3 gal.”
Thanks to a combination of lower prices and a slight downshift in demand, consumers have had more disposable income in recent weeks. GasBuddy analysts calculate that the U.S. motor fuel bill has occasionally been $500 million cheaper in some August 2014 weeks, compared to last year.
Regions that receive most of their gasoline from the U.S. Gulf Coast, which accounts for more than 51 percent of U.S. refinery capacity, could see the cheapest prices. Already some very competitive retailers have dropped prices to $3 gal or lower in ten states, all of which get much of their fuel from refiners in Texas, Louisiana, and Mississippi. But GasBuddy also projects that pump prices will dip in Rocky Mountain and Midwestern states, as well as Southwestern and Pacific Northwestern locations.
Less certain is the 60 day outlook for California and the Northeastern U.S. The Golden State doesn’t get much of the cheap tight “shale oil” and it won’t shift to an autumn gasoline recipe until November 1. Meanwhile, Northeastern supply tightness could linger thanks to some looming refinery maintenance in the Canadian Maritimes.
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