Why Are Gas Prices Plummeting?

MILL VALLEY, CA - JULY 22: A customer prepares to pump gas into his truck at a Valero gas station on July 22, 2013 in Mill Valley, California. According to AAA, the national average price for a gallon of regular gasoline rose to $3.67 as prices have surged 12 cents in the past week due in part to the unrest in Egypt and production disruptions at US refineries. (Photo by Justin Sullivan/Getty Images)
National Journal
Clare Foran
Add to Briefcase
See more stories about...
Clare Foran
Oct. 3, 2013, 4:42 p.m.

Last year, rising gas prices in Feb­ru­ary and March fueled a polit­ic­al firestorm ahead of the pres­id­en­tial elec­tion, with Re­pub­lic­ans blam­ing Pres­id­ent Obama for the price hike. Now, however, with midterm elec­tions over a year away, plum­met­ing prices have failed to at­tract polit­ic­al at­ten­tion.

The na­tion­al av­er­age gas price showed its sharpest de­cline in nearly a year, fall­ing 5.4 per­cent in Septem­ber, and it’s still drop­ping. On Thursday, the U.S. na­tion­al av­er­age was $3.38 for a gal­lon of gas, ac­cord­ing to AAA ana­lysts, and prices are es­tim­ated to de­crease by an ad­di­tion­al 25 cents per gal­lon through Decem­ber. At this time last year, the U.S. na­tion­al av­er­age was 40 cents high­er, at $3.78 a gal­lon.

A num­ber of factors have spurred the de­cline, in­clud­ing the sea­son­al shift to cheap­er fuel blends at the end of the sum­mer driv­ing sea­son, de­creased like­li­hood of U.S. in­ter­ven­tion in Syr­ia, and boom­ing do­mest­ic oil pro­duc­tion.

“Con­sumer de­mand is at its highest in the sum­mer, when folks take va­ca­tions. In the cool­er months, kids are back in school, people go back to work full time, and there’s less of an op­por­tun­ity for re­cre­ation­al con­sump­tion,” said Tom Kloza, chief oil ana­lyst for Gas­Buddy.com, a gas pri­cing and in­form­a­tion web­site.

Gas costs typ­ic­ally de­cline in the fall for an­oth­er cyc­lic­al reas­on as well — a switch to cheap­er blends of gas­ol­ine.

To keep smog un­der con­trol, the En­vir­on­ment­al Pro­tec­tion Agency man­dates the use of clean­er-burn­ing gas dur­ing the sum­mer. Those re­quire­ments don’t hold over in­to the winter months. So-called winter blends of gas­ol­ine are less ex­pens­ive, and the sav­ings are passed on to the con­sumer.

“If you think of gas­ol­ine like a cake, there’s a lot of cheap flour that you can use in the winter that you can’t use in the sum­mer be­cause it leads to high­er emis­sions,” said Patrick De­Haan, a seni­or pet­ro­leum ana­lyst with Gas­Buddy.com. “Once you get past Septem­ber 15, it gets a lot cheap­er to bake the cake.”

Cir­cum­stances not tied to sea­son­al events are also push­ing prices lower.

The cost of oil has be­gun to de­cline now that U.S. mil­it­ary in­ter­ven­tion in Syr­ia seems less likely. This, in turn, is con­trib­ut­ing to lower prices at the pump.

“Syr­ia doesn’t pro­duce much in the way of oil, but the pos­sible con­sequences of a U.S. strike could have threatened oth­er areas of the Middle East where oil is pro­duced. Since oil is traded on a glob­al mar­ket, this af­fects the price of oil every­where,” said Mi­chael Green, a spokes­man for AAA. “This has a lot to do with the risk premi­um. Whenev­er there’s in­creased risk of something hap­pen­ing to dis­rupt the oil sup­ply, that raises the price of oil.”

Gas prices have also de­clined due to a surge in do­mest­ic oil pro­duc­tion in areas like North Dakota’s Bakken Form­a­tion. Re­finer­ies across the U.S. are also run­ning more smoothly this year than last, which saw Hur­ricane Sandy cause tem­por­ary shut­downs at a num­ber of East Coast re­finer­ies.

For all these reas­ons, ana­lysts pre­dict the price of gas will con­tin­ue to fall in the com­ing weeks. “You al­ways have to be care­ful when pre­dict­ing prices,” Green said. “But most con­sumers will pay a good deal less at the pump bar­ring a ma­jor hur­ricane, re­newed ten­sions in the Middle East, or sig­ni­fic­ant re­finery fail­ures.”

What We're Following See More »
TWO MONTHS AFTER REFUSING AT CONVENTION
Cruz to Back Trump
2 days ago
THE LATEST
WHO TO BELIEVE?
Two Polls for Clinton, One for Trump
2 days ago
THE LATEST

With three days until the first debate, the polls are coming fast and furious. The latest round:

  • An Associated Press/Gfk poll of registered voters found very few voters committed, with Clin­ton lead­ing Trump, 37% to 29%, and Gary John­son at 7%.
  • A Mc­Clatchy-Mar­ist poll gave Clin­ton a six-point edge, 45% to 39%, in a four-way bal­lot test. Johnson pulls 10% support, with Jill Stein at 4%.
  • Rasmussen, which has drawn criticism for continually showing Donald Trump doing much better than he does in other polls, is at it again. A new survey gives Trump a five-point lead, 44%-39%.
NO SURPRISE
Trump Eschewing Briefing Materials in Debate Prep
2 days ago
THE DETAILS

In contrast to Hillary Clinton's meticulous debate practice sessions, Donald Trump "is largely shun­ning tra­di­tion­al de­bate pre­par­a­tions, but has been watch­ing video of…Clin­ton’s best and worst de­bate mo­ments, look­ing for her vul­ner­ab­il­it­ies.” Trump “has paid only curs­ory at­ten­tion to brief­ing ma­ter­i­als. He has re­fused to use lecterns in mock de­bate ses­sions des­pite the ur­ging of his ad­visers. He prefers spit­balling ideas with his team rather than hon­ing them in­to crisp, two-minute an­swers.”

Source:
TRUMP NO HABLA ESPANOL
Trump Makes No Outreach to Spanish Speakers
2 days ago
WHY WE CARE

Donald Trump "is on the precipice of becoming the only major-party presidential candidate this century not to reach out to millions of American voters whose dominant, first or just preferred language is Spanish. Trump has not only failed to buy any Spanish-language television or radio ads, he so far has avoided even offering a translation of his website into Spanish, breaking with two decades of bipartisan tradition."

Source:
$1.16 MILLION
Clintons Buy the House Next Door in Chappaqua
2 days ago
WHY WE CARE

Bill and Hillary Clinton have purchased the home next door to their primary residence in tony Chappaqua, New York, for $1.16 million. "By purchasing the new home, the Clinton's now own the entire cul-de-sac at the end of the road in the leafy New York suburb. The purchase makes it easier for the United States Secret Service to protect the former president and possible future commander in chief."

Source:
×