Abundant gasoline and weaker demand is nudging retail gasoline prices lower, energy analysts said Friday.
Prices were elevated at the start of summer because of geopolitical tension, according to travel club AAA, but record refinery production in recent weeks has led to a steady price decline.
"We're starting August with the lowest prices [for the month] since 2010," said Tom Kloza, chief oil analyst for the pump-price website gasbuddy.com, adding that gasoline could fall below $3 a gallon in the next few months.
The average price of regular-grade gasoline at the pump in Arkansas was $3.30 a gallon Friday, down almost 18 cents from a month ago. The national average has dropped about 15 cents from a month ago to $3.52 a gallon, according to AAA.
The decline in gasoline prices is unusual for this time of the summer travel season, AAA spokesman Don Redman said.
"Typically, we start seeing [prices in] late July start climbing and continue into August," he said.
U.S. refineries processed an average of 16.5 million barrels of oil per day in the four weeks that ended July 25, compared to 16.1 million barrels per day in the same period a year ago, according to the U.S. Energy Information Administration.
During that same period, gasoline demand softened 0.5 percent to 8.95 million barrels a day in the four weeks that ended July 25, according to the agency. A barrel is 42 gallons.
"Demand for gasoline is weakening, and refiners are producing more than we are using, so it's starting to drive prices lower," said Phil Flynn, an energy analyst with Price Futures Group in Chicago.
Because of the "U.S. shale revolution, we're producing a higher quality oil, and that higher quality of oil is showing that it yields more gasoline," he said. "It's been a very, very positive thing for the gasoline situation."
Redman said that while current prices are unlikely to cause consumers to alter their travel plans, it will help the budgets of families and businesses.
"Significant lifestyle changes" normally result when gasoline prices rise above $3.50 a gallon, he said. "Anything that comes below that is beneficial to the budget."
Redman said lower gas prices help the bottom line of small businesses and is a reprieve for the service companies that make deliveries.
"The market is getting a chance to breathe," even with current conflict in the Middle East, Redman said, referring to potential supply disruptions from unrest in Iraq. Fighting in Iraq lifted crude oil prices earlier this year.
Uncertainty about supply from other oil producing nations such as Libya and Russia has also weighed on prices this year.
While crude oil prices had a strong run this year because of international tensions, prices have started to drop recently, said Gene McGillian, an analyst and broker with Tradition Energy in Connecticut.
The price of West Texas Intermediate crude for September delivery fell 29 cents Friday to settle at $97.88 a barrel on the New York Mercantile Exchange, the lowest close since Feb. 6, Bloomberg News reported.
Brent crude dropped $1.18 to $104.84 a barrel on the London-based ICE Futures Europe exchange.
McGillian said prices have fallen because there have been no supply disruptions and the supply of oil has been more than ample in both the United States and Europe.
Gasoline futures also fell 1.9 percent to $2.74 per gallon, the lowest level since Feb. 10, Bloomberg reported.
Pump prices seem to advance a lot faster than they drop McGillian said. Whether there is significant retreat in retail gasoline prices remains "a little bit questionable," he said.
The price drop for gasoline will be short-lived, Redman said, because refineries are approaching the October maintenance season when they adjust to produce a winter blend.
A Section on 08/02/2014
Print Headline: Pump prices start August down