US oil prices fell nearly $2.00 Wednesday, extending a precipitous slide in crude prices that stretches back over the summer. It’s why analysts are predicting US gasoline prices could soon dip below $3.00 a gallon – the lowest price since 2010.
Motorists are already enjoying gas prices lower than any time since February 2011, according to data from automotive group AAA, as collapsed crude oil prices bring down the cost of refined gasoline. And some US drivers are already seeing prices below $3.00. Gas prices in Missouri averaged $2.77 on Tuesday, and more than a dozen other states have prices below $3.00 a gallon.
“Right now we see the national average at $3.09 a gallon,” says Gregg Laskoski, senior petroleum analyst at GasBuddy.com, a website that tracks gas prices across the US.
“It’s conceivable that the national average could get down to $2.95,” Mr. Laskoski adds in a telephone interview Wednesday. “Exactly when would that occur? That’s tougher to guess. It could be before Thanksgiving.”
Relief at the pump is the result of low crude oil prices, which have plummeted more than 20 percent from where they stood at the beginning of the summer. Before this summer’s price drop, crude prices had been hovering around $100 a barrel since 2011. Weak demand from China and Europe, as well as abundant supply from the US, are responsible for the recent and dramatic dip in prices, analysts say.
Crude prices remain just above $80 a barrel, though Laskoski says that crude oil inventories suggests prices may be on track to dip below the $80 mark.
“We’re well supplied,” Laskoski says, and that supply has well outstripped demand in a country that is driving fewer miles in cars that go farther on a gallon of gas.
Oil prices ticked back up Tuesday on reports that Chinese demand for oil isn’t as soft as expected. But US crude oil prices dropped $1.97 to settle at $80.52 Wednesday on news that US crude oil inventories last week were up 7.1 million barrels from the week before. That’s “near the upper limit of the average range for this time of year,” according to the latest US Energy Information Administration petroleum report.
Where US gas prices head depends heavily on oil prices. But with the supply and price of oil globally relatively stable, Laskoski says he does not expect much change in the downward trajectory.
Still, anything could happen, and observers are still wondering if falling oil prices have hit their floor.
“[W]hether we have hit bottom or not remains a question,” said Gene McGillian of Tradition Energy – an oil services advisory firm in Stamford, Connecticut – in an interview with Reuters Tuesday. “I would think not given the market's recent performance, the continued swoon of the European economies and the idea that we have more than ample supplies of oil sloshing around the world finding for a home."
US production has exploded since 2008, aided by technological advances in hydraulic fracturing and horizontal drilling that help producers extract oil deposits once thought un-reachable or too expensive to access.
And that shale oil boom has helped cushion crude oil and gas prices against geopolitical shocks.
“Because of that production, we didn’t see significant price hikes in both retail gasoline and crude oil prices when we saw the fall of Mosul in Iraq, problems with Russia and Ukraine, and air assaults to retaliate against ISIS,” Laskoski says. “These are events that in past years would have caused significant spikes.”