For the fourth straight week, average gasoline prices have moved lower, falling 5.3 cents to $2.83 per gallon Monday according to GasBuddy data compiled from over 10 million price reports covering over 135,000 stations in the last week. Average gas prices decreased in all of the nation’s 50 states, but that may not last much longer.
“The threat of an escalating trade war with China and others took a back seat to one of the most anticipated OPEC meetings last week: OPEC agreed to increase oil production by just 600 thousand barrels a day, well short of expectations amidst a hot global and U.S. economy. Crude oil prices responded by skyrocketing over 5 percent Friday while refined products, including gasoline, rose 2 percent. The worry is the rally may continue into this week as motorists prepare for the upcoming July 4 weekend,” said Patrick DeHaan, head of petroleum analysis at GasBuddy. “The decision may lead to an abrupt end in recent gas price declines or may slow it down, just as gasoline prices had been catching up to the prior slump in crude oil. I’m optimistic that we can avoid a $3 per gallon national average, but if gas prices were to mirror the gains in oil prices, a 5% gain would theoretically put us back at nearly $2.99 per gallon, not what you like to see any time, much less prior to the summer’s most popular holiday.”
OPEC announced it would increase oil production 600,000 barrels per day, representing the group’s first announced increase since 2014, and comes after a 1.8 million barrel per day production cut in 2016 that has removed hundreds of millions of barrels of oil from global inventories. The move sent oil prices screaming higher as it was largely seen as a smaller than expected increase. With 14 members, it is occasionally challenging for OPEC to be aligned in its views of production, and it’s likely the smaller increase was to meet in the middle.
Data out from the Energy Information Administration last week showed a large decline- nearly 6 million barrels- in oil inventories, which are under the five year average for this time of year. Gasoline inventories rose 3.3 million barrels and are above average for this time of year, a good sign for motorists. In addition, refineries ran at 96.7% of their capacity, a very high level for this time of year and also a good sign that refineries are meeting the high demand for gasoline during the summer driving season. U.S. oil production remained unchanged at just under 11 million barrels as the U.S. waits to succeed Russia as the world’s largest oil producer.
Largest weekly price changes: Michigan (-14 cents), Indiana (-11 cents), Illinois (-7 cents), Ohio (-7 cents), Kentucky (-7 cents), Kansas (-5 cents), Maine (-5 cents), Florida (-5 cents), Oklahoma (-5 cents) and North Carolina (-4 cents).
Lowest average gas prices: South Carolina ($2.49), Mississippi ($2.53), Alabama ($2.54), Oklahoma ($2.56), Louisiana ($2.57), Tennessee ($2.58), Arkansas ($2.58), Missouri ($2.59), Ohio ($2.62) and Virginia ($2.62).
Highest average gas prices: Hawaii ($3.68), California ($3.67), Washington ($3.42), Alaska ($3.39), Nevada ($3.33), Oregon ($3.28), Utah ($3.18), Idaho ($3.17), Arizona ($3.10) and Conneticut ($3.09).
For now, the national average may drift lower for the first half of the week before breaking the downward trend by late-week, with gas prices likely to jump higher mainly in the Great Lakes, where retail prices have plummeted under replacement cost, setting up a hike. As we approach July 4, motorists may see more small increases coming, but even including the disappointing OPEC announcement, prices are not yet poised to rise back above their May peak of $2.98 per gallon.