U.S. Gasoline Falls to $2.8279/Gallon, Lundberg Says

Source: Bloomberg

By Barbara Powell and Leela Landress

The average price of regular gasoline at U.S. filling stations fell to $2.8279 as crude oil and gasoline futures slipped on concern the European debt crisis threatens the U.S. economic recovery.

Gasoline lost 9.25 cents in the two weeks ended May 21, according to a survey of 2,500 filling stations nationwide by Trilby Lundberg, an independent gasoline analyst in Camarillo, California.

The front-month contract for crude oil lost 6.8 percent in the two weeks ended May 21. Gasoline futures dropped 7.6 percent.

Supplies of gasoline fell less than expected last week and demand sank to a six-week low, according to data from the Energy Department. Inventories of the motor fuel were 5.7 percent above revised figures from a year earlier and 6 percent above the five-year average for the period.

Read more: http://www.businessweek.com/news/2010-05-23/u-s-gasoline-falls-to-2-8279-gallon-lundberg-says-update1-.html

and disabled at the gas pumps. At least that is the way it looks to those of us getting our monthly payments, we see gas prices go up and down all month but have yet to see the gas prices fall the first week of a month.

This has to do with the switch from making winter heating oil to gasoline for the summer driving season. While you get both Home heating oil and Gasoline from refining oil the same barrel of oil, you can emphasis one or the other depending on which you believe you can sell. In Winter the emphasis is on Home Heating oil. Come April, the refiners start the switch to Gasoline for gasoline stocks are at an yearly low at that time of the year (During this switch over, any routine maintenance is also done, further delaying the switchover). By May the Switch over is complete but takes till about Memorial day for gasoline to start to exceed demand (and do to excess supply over demand prices tend to drop all summer). Come September 1, the reverse occurs, plants are shut down and routine maintenance is done but here many people put off buying Home Heating Oil till November when they need it (People will use whatever they have left over from the previous winter during October and early November, but with Cold weather becoming the norm in November people buy home heating oil and continue buying it till April, when winter finally breaks. Notice you have only two months from the end of people buying Home Heating oil till the Summer Driving Season, but almost three months from the end of the Summer Driving Season and the start of buying home heating oil. Thus you see less of a problem in Fall then in Spring (This is also affected by the fact that the ultimate consumer of both home heating oil and gasoline having different ability to store each. Most people can store home hearing oil for months, they have 100-500 gallon tanks to do so. On the other hand Gasoline buyers rarely can store gasoline for months at a time (They can store 5-10 gallons in gasoline cans, but NOT one to two months of gasoline when it is cheap, unlike home heating oil which they can store for months after buying it to fill their tanks designed to hold enough fuel for one to two months of fuel).]

Thus it is NOT unusual for someone to buy Home heating oil in the spring, when it is the cheapest, on the grounds he MAY use it in the spring and if he does not he has it for the following Winter. It is dangerous and rare for people to do the same with gasoline. Thus in the Fall the pressure to buy home hearing fuel is NOT as critical as someone needing to buy gasoline in the spring,

The price of Gasoline follows the above, reaches its highest about Memorial day, where the Demand OVER Supply is the highest, and the lowest price in the fall, where demand over supply is at the lowest level. This happens every year. In 2008 the final price run up started in the spring, but did NOT peak on Memorial day. That was do to speculators looking at the amount of oil held in inventories and better it would get worse (Which is what happened in 2008). Price of gasoline has been going up since about 2002, but that was a steady increase, caused by reduce production of oil while demand for oil was increasing. Some speculators were in that price increase but such speculators also tended to be people in the business of distributing and selling oil. Thus in spring 2008 you had three things occurring at the same time, first the traditional spring run up of price, the ongoing steady increase in price of oil do to deduced demand and increased supply and market speculators seeing both in action deciding that oil will go up till oil inventory increases. Oil Inventories did NOT increase till August, do to the second drop in oil consumption in American History (The first drop was 2008, but it was just marginal, the August 2008 drop was almost 5%). That drop caused oil inventories to increase and the speculators then switched to how much oil would fall. I suspect what happened in 2008 will re incur whenever we have tight oil inventories. We do NOT have that this year, so the price of gasoline should drop all summer long, but oil supplies are tight so low inventories will occur and with such low inventories will come a rapid run up of price. Thus this is a "Normal" year, some price increase in the spring followed by a price decrease in the rest of the year.

Please note I am ignoring the situation in the Gulf, which may change everything depending on how and when the oil gusher is capped.

Just incredible the variation even within a 10 mile radius.

gas prices no longer dictate who fast people drive. the average speed on the toll road i have been driving the last two months is around 75-80. the last price spike people were driving a lot slower on this toll road.

Down from about 2.91 a few weeks ago.

It's $2.99-$3.09 here. Hasn't moved in weeks.

I have to go to WY or CO for cheap gas.

a couple of days ago. $2.57 north of there.

its 2.67 where I live, it was 2.89 around 2-3 weeks ago. I live in a suburb near Philadelphia, PA. It was 4.09 in summer 08 and it went down to 1.59 at the worst part of the recession. I remember it was 3.39 after Katrina in August 05.

I know many people on the DU don't like ethanol for environmental reasons, but I've been using it since the 70's with no problems.

I'm making up the difference! 3.34 in Anchorage...maybe it went down overnight!

and the local gas station is BP

The local Baker's stores (Kroger) in Omaha get us 10 cents off a gallon for every $100 of grocery's purchased.