Motorists are about to experience a spring surprise. Gas prices have declined slightly as the price of crude oil fell last week and could drop as much as 5 to 10 cents a gallon in the next couple of weeks, AAA said Monday.
The falling prices are unexpected at this time of year when gas prices typically rise as refineries undergo maintenance and switch to more expensive summer fuel blends.
Monday, Palm Beach County’s average had already dipped 2 cents a gallon to $2.49 from $2.51 a week ago, according to AAA’s Fuel Gauge Report. Florida’s average stood at $2.27 Monday, down 1 cent from a week ago.
Enjoy it while it lasts. It’s likely that prices will go back up as Memorial Day approaches.
“The oil market suffered a ‘mini collapse’ last week, following reports of a record build in domestic crude oil,” said AAA spokesman Mark Jenkins. “This will postpone the customary spring-time gas price spike. Prices could drop 5-10 cents in the short term, but this downward trend may be only temporary.”
Monday, U.S. West Texas Intermediate crude fell 17 cents to $48.29 a barrel, an 8 percent drop from a week ago.
Patrick DeHaan, senior petroleum analyst for GasBuddy.com said, “A sudden plunge in the price of oil is likely to weigh on gas prices, at least temporarily. With little warning or expectation, crude oil last week broke out of the rut it had well established, with crude prices falling out of a 3-month range of $51-$54 per barrel to $49.
“Naturally, when oil prices take a beating such as they did last week, one might expect gasoline prices to move in lockstep, but due the complex relationship of oil and gasoline prices and the middleman- U.S. refineries- motorists may not see as large a decline at the pump as they may hope for- but certainly stay tuned,” DeHaan said.
While he remains optimistic that the annual spring rally at the pump could be less severe than expected, DeHaan added that it remains difficult to know where the new path will lead oil prices in the week ahead.
Oil prices initially rose on Nov. 30, when OPEC agreed to cut production by some 1.2 million barrels per day, in an effort to reduce the global oversupply of oil, AAA said. As OPEC implemented those cuts, the U.S. ramped-up production and supplies. U.S. oil production has risen 1.6 percent since the beginning of the year.
Crude inventories also climbed a total 9 percent. Inventories first reached a new all-time high four weeks ago, and have grown every week since.
“Although it could take several weeks, analysts believe oil prices could recover by the time OPEC meets again in May,” Jenkins said. “Meanwhile, refineries will have to battle rising demand as they begin pumping summer-blend gasoline into the market in April and May. All these factors could push pump prices 20-40 cents higher by Memorial Day.”
Demand has been sluggish so far this year, yet it rose 7 percent last week, according to the U.S. Energy Information Administration. Total gasoline supplies are also down 2.6 percent. These fundamental shifts would normally push gas prices higher, but are not strong enough to outweigh the downward pressure from falling oil prices, which dramatically influence the cost of producing gasoline, AAA said.