For the first time in weeks, the national average price for a gallon of gasoline has dropped, falling half a penny to $2.80 per gallon Monday, according to GasBuddy’s latest weekly survey of 135,000 gas stations. While 35 states saw average prices rise, 15 saw prices decline, leading the national average to drop slightly after rising to its highest level since November 2014.
GasBuddy analysts correctly predicted this small break in the national average in last week’s update, suggesting the cooldown may be temporary. “The rise in gas prices has slowed substantially in the last week in some places, with 15 states seeing gas prices move lower versus last week,” said Patrick DeHaan, head of petroleum analysis for GasBuddy. “While we may not be out of the woods yet, especially with President Trump mulling over the Iran nuclear deal, it’s possible we’re very close. Much will depend on his decision on this subject. Killing the deal may inflict more pain on motorists as it may lead to sanctions placed on Iran and their oil production, which would likely push oil prices higher. With summer gasoline now phased in and reaching motorists’ gas tanks across the country, it is no longer an active issue pushing prices up. Oil’s moves and possible moves will likely be the key catalyst behind changes at the pump in the weeks ahead as summer driving season soon gets underway. Motorists should expect the national average to drift around in the upper $2 per gallon range for much of the summer.”
Crude oil prices, however, began rallying again Monday morning on fears that President Trump would kill the Iran nuclear deal, opening the door to sanctions on Iran’s crude oil exports, effectively cutting global supply and pushing some U.S. allies to seek oil elsewhere. In mid-day trading on Monday, a barrel of West Texas Intermediate (WTI) crude oil was up 83 cents a barrel to $70.55, the highest since 2014. Trump’s decision on Iran is likely this week, just ahead of a Saturday deadline. Oil prices may rally stronger if Trump reveals a tough take on Iran, while prices may fall slightly should Trump soften his stance.
Weekly data from the Energy Information Administration last week showed a large 6.2 million barrel rise in U.S. oil inventories, closing the year-on-year gap to a drop of 91.8 million barrels, shrinking from the constant 100 million barrel drops seen a few weeks ago. Gasoline inventories also posted a rise of 1.2 million barrels, but remained 3.3 million barrels lower than a year ago as refiners have now finished the transition to summer blends of gasoline across the entire country. Distillate inventories bucked the trend and fell 3.9 million barrels, 21% under their year-ago levels as exports of distillate remained high. Refiners utilization increased 0.3% to 91.1% of capacity last week, a likely signal that they are ramping up ahead of Memorial Day- the official start to summer driving season in the U.S., the world’s largest oil consumer.
Looking state-by-state, the largest weekly changes in average gas prices were seen in: Michigan (-12 cents), Ohio (-6 cents), Indiana (+6 cents), Kentucky (-4 cents), South Dakota (+3 cents), Wisconsin (+3 cents), Arizona (+3 cents), Idaho (+2 cents), Illinois (+2 cents) and Oregon (+2 cents).
States with the lowest average gasoline prices: Oklahoma ($2.51), Arkansas ($2.52), Missouri ($2.52), Louisiana ($2.53), Mississippi ($2.53), South Carolina ($2.54), Alabama ($2.56), Kansas ($2.57), Texas ($2.58) and Tennessee ($2.59).
States with the highest average gasoline prices: California ($3.62), Hawaii ($3.59), Washington ($3.29), Alaska ($3.25), Nevada ($3.24), Oregon ($3.18), Utah ($3.11), Idaho ($3.07), Pennsylvania ($3.01) and Connecticut ($2.99).
The national average is poised to rise in the week ahead, following oil’s upward move Monday, awaiting President Trump’s decision on Iran. The harsher the comments from the President, the more oil prices may rally, while a softer tone may lead oil to give up some of the recent gains. Gas prices will eventually follow in the weeks following, whichever way oil moves.