Gasoline prices should fall further as crude continues to slide
Crude oil prices are on such a slide that they could drop back into the low $80s a barrel, Wall Street analysts said, adding that this could reduce retail gasoline prices to about $3 a gallon nationally and to about $3.40 to $3.50 a gallon in California.
Oil's slide was continuing Monday on a volatile trading day. West Texas Intermediate crude, the U.S. benchmark, was down an additional 56 cents to $90.61 a barrel after falling as low as $89.61 a barrel on the New York Mercantile Exchange. The U.S. benchmark has fallen 15% in the second quarter.
Brent crude, the European benchmark, was off 17 cents to $104.95 a barrel, having dropped as low as $102.28 a barrel on the ICE Futures Exchange in London. Continuing concerns about the strength of the global recovery and angst over European debt levels, particularly that of Greece, were seen as the biggest factors.
"There are real worries over whether the deal to bail out Greece will hold together. And last week's announcement about the release of oil from strategic national reserves is definitely having an impact," said John Kilduff, a partner and energy analyst for Again Capital in New York. "The low $80s for oil are a definite possibility and that could knock another 40 cents to 50 cents off the price of a gallon of gasoline."
Currently, the average price of a gallon of gasoline in California is $3.837 a gallon, down from $3.903 a week ago. That's also down from a high of $4.25 a gallon in May, but still significantly higher than the year-ago average of $3.135 a gallon. The retail gasoline figures are from the AAA Fuel Gauge Report, which monitors prices collected by the Oil Price Information Service and Wright Express at more than 100,000 service stations across the nation.
Nationally, the average fell to $3.565 a gallon, down from $3.98 a gallon in early May. A year ago, the average price for a gallon of regular in the U.S. was $2.755.
In other energy news, the 28-member International Energy Agency announced a nation-by-nation breakdown of how much oil and refined products were going to be released from strategic reserves. The Paris-based IEA, which includes the U.S., announced last week that government reserves would be tapped in a bid to reduce crude prices, make up for the loss of Libyan oil on world markets and provide a boost to struggling economies.
The U.S. will release 30 million barrels of crude, the IEA said. Japan and South Korea are releasing 7.4 million barrels of crude and 3.96 million barrels of refined oil products, the IEA added, and European nations will release 4.2 million barrels of crude and 15 million barrels of products.
-- Ronald D. White
Chart: AAA's 12-month rolling average of U.S. petroleum prices, per gallon.