The average price of a gallon of regular gasoline in the U.S. this year never reached the highs seen in 2008, when the all-time record of $4.114 was reached. The 2012 average never even climbed as high as it was last year, when it hit $3.965, according to the Energy Department.
But fuel prices have been so consistently high in 2012 that American motorists are on pace to spend more on gasoline this year — $483 billion, or $1.32 billion a day — than they ever have before, according to the Oil Price Information Service (OPIS) in New Jersey, the Los Angeles Times reported.
That would break the old record for the amount of money spent by Americans on gasoline, set last year, by about $12 billion. That’s in spite of the fact that the U.S. average topped out this year at $3.941 a gallon back in April.
Analysts say the most remarkable thing is that high gasoline prices didn’t have the chilling effect on consumer spending that they did four years ago.
“Americans seem to have accepted the news on high fuel prices with aplomb,” said Tom Kloza, chief oil analyst for OPIS.
Gasoline prices this year were driven, in part, by high oil prices. They were also affected by consistently high exports of U.S.-produced diesel and gasoline to customers overseas.
A third factor involved periodic regional spikes that helped keep the national average high.
Three Spikes in 2012
The first of those spikes occurred in the Midwest, where petroleum pipeline ruptures and refinery outages kicked prices sharply higher.
The second occurred in October in California, where prices hit a new state record of $4.671 a gallon, sparking several calls for federal and state investigations of refinery practices.
More recently, damage from Hurricane Sandy along the Eastern Seaboard shut down several refineries and led to temporary fuel rationing in New York and New Jersey.
These impacts canceled out the fact that U.S. demand for motor fuel, running at around 8.7 million barrels a day so far this year, is at its lowest level since 2001, Kloza said.
The U.S. Energy Department said earlier this year that the average price for a gallon of regular gasoline was running at about $3.64 in 2012, up from last year’s record average of $3.53.
There is some good news. Fuel prices are expected to average about $3.44 a gallon in 2013, the Energy Department projects.
The U.S. will become the world’s top producer of oil within five years, a net exporter of the fuel around 2030 and nearly self-sufficient in energy by 2035, according to a new report from the International Energy Agency.
It’s a bold set of predictions for a nation that currently imports some 20% of its energy needs, according to a report by the Los Angeles Times.
Recently, however, an “energy renaissance” in the U.S. has caused a boost in oil, shale gas and bio-energy production due to new technologies such as hydraulic fracturing, or fracking. Fuel efficiency has improved in the transportation sector. The clean energy industry has seen an influx of solar and wind efforts.
By 2015, U.S. oil production is expected to rise to 10 million barrels per day (bpd) before increasing to 11.1 million bpd by 2020, overtaking second-place Russia and front-runner Saudi Arabia. The U.S. will export more oil than it brings into the country in 2030.
Around the same time, however, Saudi Arabia will be producing some 11.4 million bpd of oil, outpacing the 10.2 million from the U.S. In 2035, U.S. production will slip to 9.2 million bpd, far behind the Middle Eastern nation’s 12.3 million bpd. Iraq will exceed Russia to become the world’s second largest oil exporter.
At that point, real oil prices will reach $125 a barrel. By then, however, the U.S. won’t be relying much on foreign energy, according to the IEA’s World Energy Outlook.
Globally, the energy economy will undergo a “sea change,” according to the report, with nearly 90% of Middle Eastern oil exports redirecting toward Asia.
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The average U.S. price for a gallon of regular gasoline took its biggest drop since 2008 in the past two weeks, due to lower crude oil prices and a big price drop in pump prices in California and Hurricane Sandy, according to a widely followed survey released on Sunday (Nov. 4).
Reuters reported that gasoline prices averaged $3.5454 per gallon on Nov. 2, down 20.75 cents from Oct. 19 when drivers were paying $3.7529 at the pump, Lundberg said.
The decline was the biggest two-week price drop since the survey recorded a 21.9 cents price decline Dec. 5, 2008 due to a crash in petroleum demand during the global recession.
Even though many people had to line up for gasoline for hours after Sandy devastated much of the Northeast coast, the storm played a part in the price decline as many would-be consumers were not able to travel as a result, according Trilby Lundberg, editor of the Lundberg Survey.
Lundberg also cited the seasonal dip in demand that typically comes after August.
While demand appeared to be very high for gasoline in New York and New Jersey after the storm, Lundberg said that purchases were down because many people could not get to fuel.
However, supply shortages were not causing an increase in the average price of gasoline, according Lundberg.
“There is a fear among retailers that they will be accused and prosecuted for price gouging if they raise prices enough to prevent running out,” she said, adding that the problems would be unlikely to end soon.
“It’s going to be a long and hard recovery for infrastructure and fuel supply but also for fuel demand,” Lundberg said.
Another reason for the total U.S. price decline in the latest survey is California, the biggest state consumer, where pump prices fell 49 cents in past two weeks after an extreme price increase a month ago because of refinery problems.
The Nov. 2 survey shows that gas prices have fallen a total of 29.21 cents in the last month, Lundberg said.
Crude oil prices rose towards $110 on Tuesday (Oct. 29), supported by worries of potential supply disruption on the U.S. East Coast, being battered by Hurricane Sandy, although fears of weaker demand from the storm-hit region capped gains.
Reuters reported that U.S. refinery and pipeline companies will begin assessing the storm damage, hoping their flood defenses and on-site power would allow operations to resume swiftly.
But even if refineries escape unscathed, any damage to the vast network of oil terminals, pipelines and trucking facilities in the region could complicate supply logistics.
Brent crude for December rose 13 cents to $109.57 a barrel in early trading, recovering from a fall to $108.75 earlier in the session. U.S. crude for December was up 40 cents at $85.94.
U.S. gasoline futures were little changed at $2.7530 a gallon, after climbing more than 5 cents on Monday on expectations of tighter supply.
“The shutdown of refineries basically means that there are breaks in the supply chain,” said Michael Hewson, senior markets analyst at CMC Markets. “(This) means there will be a little bit of scarcity, so that can still underpin prices.”
Fuel supply into the region ground almost to a halt with the closure of two-thirds of the region’s refineries, its biggest pipeline and most major ports.
Americans thinking about driving over the river and through the woods for Thanksgiving could be in line for a nice surprise: lower gas prices.
CNN reported that prices have fallen 3.8% over the past 11 days to a national average of $3.67 a gallon for regular, according to motorist group AAA. And analysts say the price could fall another 30 cents by Nov. 22, Thanksgiving Day.
Patrick DeHaan, senior petroleum analyst at Gasbuddy.com forecasts prices falling to $3.35 a gallon by Thanksgiving. Between Thanksgiving and Christmas, he sees prices in the range of $3.25 to $3.45 a gallon.
Ben Brockwell, director of data, pricing and information services with Oil Prices Information Service, also sees prices falling, although not as steeply, to below $3.50 a gallon.
One reason for the forecast: Brockwell says wholesale prices have dropped as much as 30 cents a gallon in some markets. By comparison, the national average has fallen 12 cents over the past week. By that measure, Brockwell says the recent decline still has room to run.
There is typically a lag before a decline in wholesale prices is reflected at the pump.
In June, amid plummeting gas prices, the prospect of a $3-per-gallon national average seemed like it could become a reality by Halloween.
Time reported that after reaching the most expensive ever gas prices for September — which came on the heels of the highest-ever end-of-summer gas prices — that forecast seems highly unlikely to become reality. But at long last, drivers are finally seeing some relief at the pump.
The latest Energy Information Administration report indicates that the national average for a gallon of regular stood at $3.826 as of September 24. That’s about 5 cents cheaper than the week before.
Gas prices were expected to start declining in August, but Hurricane Isaac, refinery problems, and other factors boosted prices higher. The result: this week is the first time gas prices have declined since way back in early July.
Drivers in some states are getting a bigger break than others. In Michigan, for instance, the the average gallon was 10 cents cheaper in one week’s time, dropping from $4.05 to $3.95. According to AAA’s Fuel Gauge Report, average prices in seven states still remain over the $4 mark (Alaska, California, Connecticut, Hawaii, Illinois, New York, Washington).
It’s also noteworthy that the national average is roughly 30 cents per gallon more than a year ago at this time.
Drivers were hit with the biggest one-day jump in gasoline prices in 18 months Wednesday (Aug. 29) just as the last heavy driving weekend of the summer approaches.
The Associated Press reported that as Hurricane Isaac swamps the nation’s oil and gas hub along the Gulf Coast, it’s delivering sharply higher pump prices to storm-battered residents of Louisiana and Mississippi — and also to unsuspecting drivers up north in Illinois, Indiana and Ohio.
The national average price of a gallon of gas jumped almost five cents Wednesday to $3.80, the highest ever for this date. Prices are expected to continue to climb through Labor Day weekend, the end of the summer driving season.
“The national average will keep ticking higher, and it’s going to be noticeable,” says Patrick DeHaan, senior petroleum analyst at Gasbuddy.com
The wide storm shut down several refineries along the Gulf Coast and others are operating at reduced rates. In all, about 1.3 million barrels per day of refining capacity is affected. So, it’s no surprise that drivers in Louisiana, Alabama, Mississippi and Florida saw gas prices rise by a dime or more in the past week.
But some states in the Midwest are suffering even more dramatic spikes. Ohio prices jumped 14 cents, Indiana prices soared 13 cents and Illinois prices jumped 10 cents on Wednesday alone according to the Oil Price Information Service. Days before Isaac is expected to douse those states with rain, the storm forced the shutdown of a pipeline that serves a number of Midwest refineries.
Gasoline prices are up sharply in the past month on surging crude oil costs and refinery woes, and now are likely to make 2012 the costliest year ever at the pump.
USA Today reported that nationally, gasoline averages $3.71 a gallon — up 31 cents since mid-July and is now higher than year-ago levels in 39 states. Prices are likely to continue climbing through August, with little relief until after Labor Day.
The swift, month-long, 9% price climb has lifted 2012′s average to $3.61 a gallon, vs. 2011′s $3.51, which had been the most expensive year ever for motorists. Even with demand expected to recede after the peak summer driving season, 2012 will surpass last year’s price, says Brian Milne of energy tracker Telvent DTN .
The run-up comes at a time when prices typically have peaked for the year, and just weeks after decreasing demand and slowing worldwide economic growth pushed prices well off 2012 highs. The trend had prompted some industry experts to forecast $3 a gallon gasoline by autumn. Now, Milne expects a top at about $3.90 before dropping in September.
Motorists in the Midwest are already paying that much, or more. Fallout from production cuts at four Illinois refineries has pushed prices in Illinois and Michigan to $4 or higher, while West Coast prices rocketed 40 cents a gallon following the Aug. 6 fire at a Northern California Chevron refinery. (A lawsuit was filed in Contra Costa County Superior Court Wednesday on behalf of nine nearby residents, alleging Chevron was negligent in refinery maintenance. The company says its reviewing the lawsuit.
Crude oil prices continue to rise. Since bottoming at about $78 a barrel in late June, benchmark West Texas Intermediate has soared more than 20%. In mid-day Thursday trading, crude was priced above $95 a barrel, a three-month high.
Scott Anderson, chief economist at Bank of the West, says if prices continue to rise, they could crimp a rebound in consumer spending. The Commerce Department reported Tuesday that July consumer spending rose 0.8%, the largest gain in five months.
Motorists in West Coast states are about to see a big spike in gas prices, the fallout from a fire that cut production at one of the region’s largest oil refineries.
USA Today reported that gasoline prices, now averaging $3.87 a gallon in California, $3.72 in Washington and $3.69 in Oregon, are expected to spike to $4.15 to $4.25 a gallon over the next week to 10 days following Monday’s partial shutdown of a Chevron refinery in Richmond, Calif.
Nationally, gasoline prices have climbed 27 cents a gallon in the past month. While the refinery fire will drive prices along the West Coast, it will also lift the national average above year-ago levels.
“August looks like a very touch-and-go month for the entire country,” says OPIS analyst Tom Kloza, who expects price relief after Labor Day. For the year to date, gasoline has averaged $3.61 a gallon — 10 cents more than the average for all 2011, the most expensive year ever, he says.
Patrick DeHaan, senior oil analyst for gasbuddy.com, expects California, Oregon and western Washington state to experience price spikes like the ones that hit major parts of the Midwest in June, when an Illinois refinery shut down and three others in the state cut production.
“The West Coast is on the launch pad waiting for takeoff,” DeHaan says. “We’re talking over $4 a gallon, easily. It’s not going to be good for motorists.”
Prices in Illinois, Indiana, Michigan, Wisconsin and Minnesota remain as much as 39 cents a gallon higher than the national average of $3.65 a gallon, according to the Oil Price Information Service. “The infection is going to spread from the Midwest to the West Coast,” DeHaan says.
Changes in political and economic conditions on the other side of the world are being felt here as the national average price for regular retail gasoline increased last week for the first time in three months.
“Although oil prices retreated at the end of last week, it’s likely motorists have seen the last of the summer price reductions at the pump,” said Jessica Brady, AAA spokeswoman, The Auto Club Group.
According to a report in the Gainesville (Fla.) Sun, the national average price of regular unleaded gasoline is $3.38, 5 cents more than last week.
The price of gas peaked the week of April 6, when the weekly average was $3.92, AAA reported. Prices then entered a downward trend until last week when motorists saw prices jump overnight. Bullish news hit the market at the start of the month and caused oil prices to spike, which has led to the rise at the pump.
The two main factors that pushed oil prices higher last week, AAA reported, were imposed European sanctions against Iran and an agreed-upon plan by European leaders to save the euro and resolve the ongoing debt crisis.
The European news, among other things, pushed oil prices to $88 a barrel last week, however the upward pressure soon dissipated after more pessimistic economic news was released. A barrel of oil settled Friday at $84.45 on the New York Mercantile Exchange — 51 cents less than the prior week.