California gasoline prices fall but U.S. average still rising
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California gasoline prices may be headed sharply lower in the coming weeks to the $3.50-to-$3.75-a-gallon range, analysts said, but perhaps not quickly enough to give motorists confidence about the summer driving season.
Retail gasoline prices in California peaked last week and have been on a mild decline in recent days. The state’s average fell overnight to $4.253 a gallon, down 2 cents in the last week, according to the AAA Fuel Gauge Report. The AAA report uses data from more than 100,000 self-serve service stations around the U.S., compiled by the Oil Price Information Service and Wright Express.
That contrasted sharply with the rest of the U.S., where the average price of a gallon of regular unleaded gasoline was again climbing toward $4 a gallon after falling just short of that mark last week. The national average reached $3.984 a gallon overnight, up 2.2 cents in the last week.
Parts of the U.S., such as California and Hawaii, have already seen isolated instances of prices of about $5 a gallon. The Chicago area has seen prices in the $4.85-to-$5 range and parts of Alaska have seen prices above $8 a gallon.
But California’s prices may be dropping soon because it has not had any serious refinery outages and has been spared problems affecting other parts of the U.S. Deadly tornadoes recently caused power outages that briefly shut down some refineries in the South, and that part of the country was still awaiting news on whether near-record flooding on the Mississippi River will force the closure of other refineries.
‘The rest of the country may see brief paroxysms of price rises over the next couple of weeks, but California should be headed sharply lower, and soon,’ said Tom Kloza, chief oil analyst for the Oil Price Information Service. Kloza made the prediction that California prices should reach the $3.50-to-$3.75 range.
But the ire among Americans over high fuel prices may have gone on too long, according to other experts, who said that the U.S. would probably see lighter travel this summer from motorists who have faced too much pain at the pump since the beginning of the year.
The Paris-based International Energy Agency, for example, Thursday trimmed its 2011 oil demand growth forecast for the first time, saying that high fuel prices would reduce consumption. The IEA also said that fuel demand in North America would decline this year by 190,000 barrels a day to 23.7 million a day.
‘Retail prices are now well in the $3-$4 gallon threshold that typically triggers a fall in vehicle-miles traveled,’ the IEA said in its monthly report, later adding ‘we believe gasoline demand will indeed disappoint this year -- rising seasonally but nonetheless declining on a yearly basis if retail prices remain at current levels.’
Joe Hahn, a professor who focuses on quantitative business analysis and energy price modeling at Pepperdine University’s Graziadio School of Business and Management, said Americans had been outraged by some of the highest fuel prices since 2008. Hahn says motorists have been doing what they can to reduce fuel consumption.
‘We’ve seen prices in the same range as two summers ago. People are asking why are we shipping so much of our money overseas to pay for foreign oil. They’re asking why don’t we have a better energy policy. And when that happens, people drive less, at least to the extent that they can change their habits,’ Hahn said.
Long term, Hahn said, the longer prices hover around the $4-a-gallon mark the more likely that Americans might come to accept that price level as an unavoidable fact of life, ‘but they aren’t there yet. People continue to be upset about these prices.’
In other energy news, crude oil futures for June delivery rose 76 cents, or 0.8%, to $98.97 a barrel on the New York Mercantile Exchange, after tumbling $5.67 on Wednesday. Brent North Sea oil increased 99 cents, or 0.9% to $113.56 a barrel on the London-based ICE Futures Europe exchange.
-- Ronald D. White
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