At the gas pump, perhaps the start of real relief
The long-awaited moment of relief for U.S. motorists might finally be at hand. The drop in retail gasoline prices has finally gained momentum with the California average falling by nearly a dime in the past week and the U.S. price declining by more than 11 cents.
It was fast enough for one analyst to reiterate his opinion that the state's prices were heading toward the $3.50 to $3.75 a gallon range in the coming weeks. But the analyst, Tom Kloza, now says it should be closer to $3.50 a gallon in California.
He added that the sharp drop should stoke concerns that the dramatic rise in fuel prices that began last September was driven more by Wall Street speculation, not by supply and demand influences. Gasoline supplies were ample through much of the biggest price jump since the summer of 2008.
"If anything, I think a lot of us are surprised that the pace hasn't quickened a bit more. There was so much speculative investment money bet on crude oil and on gasoline that it had to fall," said Kloza, chief oil analyst for the Oil Price Information Service.
"For those of us who have watched a long time, this was a combination of hysteria and euphoria for the speculators. You had the panic mentality of the crowd who collectively acted like blockheads," Kloza said.
In California, the average price of a gallon of regular gasoline reached $4.118, down from $4.217 a week earlier, according to the AAA Fuel Gauge Report. The AAA uses receipts compiled daily at more than 100,000 retail outlets across the U.S. by the Oil Price Information Service and Wright Express.
Discount gasoline chains were clearly leading the charge. At Costcos, Sam's Clubs, and Food 4 Less stations in many parts of Southern California, a gallon of regular gasoline could be bought for as little as $3.84 to $3.88.
Nationally, the AAA Fuel Report said that the average cost of a gallon of regular fell to $3.843, down from $3.955 a week earlier, as the worst Mississippi River flooding in more than 70 years failed to have a major impact on several large refineries.
Investment planner Jacob Gold of Jacob Gold & Associates Inc. cited quick thinking from the Army Corps of Engineers in opening spillways on the river.
"The Mississippi River may have crested in New Orleans late Saturday. By opening a spillway upriver nine days ago, the river's level reached only 17 feet or 2 ½ feet lower than what would have occurred had the spillway not been used. The levees in New Orleans are 20 feet high," Gold said.
Oil continued to fall as well on Monday. Crude oil futures had dropped by more than $3.50 a barrel to $96.50 a barrel in trading on the New York Mercantile Exchange. London's Brent crude futures fell more than $3.80 to an intraday low of $108.58 a barrel.
--Ronald D. White