Gasoline and oil prices fall as Saudi Arabia moves to boost production
Pump prices continued to fall in California and across the U.S. and the trend should continue, analysts said, after the world's biggest oil producer took steps Friday to boost its exports.
Saudi Arabia may increase its oil output by as much as 13% in coming days, a Saudi newspaper reported on Friday. The word came just days after the Organization of Petroleum Exporting Countries snubbed a Saudi call to raise production quotas to reduce prices and help boost the global economic recovery. Analysts saw it as a bold step to reassert Saudi influence over the cartel.
The Saudis had urged their colleagues to make up for the loss of Libyan oil production as that country still staggers under a struggle to unseat the regime of longtime leader Moammar Kadafi. A faction led by Iran, Venezuela, Ecuador and Iraq succeeded in thwarting the Saudi goal, but analysts said that Saudi Arabia still had enough spare capacity to act on its own.
"We're hearing that the Saudis might go to more than 10 million barrels a day with an increase of about 1.5 million barrels all on their own. We could get more oil out of the OPEC nonagreement than we might have if they had agreed to do it as a group," said Phil Flynn, an analyst with PFGBest Research in Chicago, who added, "the Saudis are opening the taps and showing their displeasure with the rest of the cartel."
Flynn said that gasoline prices should continue to fall as a result.
Crude prices quickly tumbled. Crude oil for July delivery fell $2.76 to $99.17 a barrel on the New York Mercantile Exchange, although prices remain 31% higher than a year ago. Brent crude for July delivery fell $1.18 to $118.39 a barrel on the London-based ICE Futures Europe exchange.
Retail gasoline prices were already moving lower. The AAA of Southern California's Weekend Gas Watch said that most local retail outlets were already below $4 a gallon. It advised motorists to be selective and touted its own smarthphone apps as good solutions.
“As prices are dropping, we are seeing some wider gaps between the cheapest and most expensive gas stations, so consumers should continue to aggressively price shop using tools like AAA.com/triptik or the Triptik iPhone/Android app,” said Auto Club spokesperson Jeffrey Spring. “Drivers in the Coachella Valley area can find prices in the $3.60 to $3.70 range, and there are a few stations in the greater L.A. and San Diego regions that have prices under $3.80 a gallon.”
The average price of a gallon of regular gasoline in California fell to $3.958 overnight, said the AAA, which uses data from more than 100,000 retail outlets across the U.S. compiled by the Oil Price Information Service and Wright Express. A week ago, the California average stood at $4.017 a gallon.
It came on an unusual day in which Calfornia was not on the list of the five most expensive states in the U.S. for gasoline prices, according to the AAA. California ranked only seventh on a list headed by Alaska ($4.240 a gallon), Illinois ($4.056), Hawaii ($4.030), Connecticut ($4.027), and New York ($3.969).
The five cheapest states for gasoline were South Carolina ($3.442 a gallon), Tennessee ($3.497), Mississippi ($3.503), Alabama ($3.517) and Arkansas ($3.541).
Nationally, the average price of a gallon of gasoline fell another 1.1 cents overnight to $3.723.
--Ronald D. White
Chart: Graphic showing the 12-month average for gasoline prices in California. Credit: AAA