Correction: Saudi Arabia told the Organization of the Petroleum Exporting Countries last week that it cut oil production last month. The timing of the production cut was incorrectly reported in a Thursday story about gasoline prices.
Crude oil prices that continue to soften despite current conflicts in Iraq and Ukraine are pushing down the price of retail gasoline, energy analysts said Wednesday.
Retail gas prices also are dropping as refiners transition to winter-blend fuel and demand wanes with the end of the driving season.
"Gasoline demand, while it's improved in recent weeks, it really hasn't been a blockbuster summer," said Phil Flynn, an analyst with Price Futures Group in Chicago.
The price of gasoline at the pump in Arkansas averaged $3.15 a gallon Wednesday, compared with $3.25 a gallon a month ago, according to auto club AAA. The national average price for gasoline was $3.37 a gallon, down 9 cents since a month ago, according to AAA.
Weak demand coupled with growing oil production in the United States is moving gasoline prices lower, Flynn said.
The Energy Information Administration said Wednesday that U.S. oil production has hit the highest level since 1986. Domestic crude production reached 8.83 million barrels last week, according to the agency's data.
U.S. oil production has soared as a result of the shale boom. Hydraulic fracturing, or fracking, has allowed energy companies to extract of oil from rock formations that previously had been inaccessible.
"All this record oil production and refineries taking advantage of this new type of crude we are producing is driving prices lower," Flynn said.
The cost of West Texas Intermediate crude fell Wednesday from its two-week high to $94.42 a barrel on the New York Mercantile Exchange after the energy administration's report showed inventories rose.
Saudi Arabia told OPEC last week that it plans to cut oil production last month, but output from Iran, Iraq and Nigeria rose, leading to an abundant supply that has moved brent crude futures below $100.
Brent crude fell 8 cents to $98.97 a barrel on the ICE Futures Europe exchange Wednesday. Wholesale gasoline futures gained 1.04 cents to $2.57 a gallon.
Lower gasoline prices can spur consumer spending, according to news release by Gasbuddy.com, a pump-price tracking website.
Retail and food services sales in August advanced 0.6 percent from the previous month and 4.8 percent from last year, but gasoline stations saw sales decline, according to a report last week from the U.S. Commerce Department.
The price of gasoline is of interest to retailers. When prices at the pump rise, family budgets tighten, said Kathy Deck, director of the Center for Business and Economic Research at the University of Arkansas at Fayetteville.
And when that happens, she said, "consumers often just cut back on other retail purchases."
Some analysts said gasoline prices could plunge below $3 a gallon and stay there through the winter. Others said the drop will soon flatten.
At current prices, further declines will be hard to come by, said Gene McGillian, an analyst with Tradition Energy.
Gasbuddy.com expects retail prices to dip below $3 a gallon during the Christmas shopping season.
The website attributed the lower prices to the switch to the cheaper winter-blend fuel, which is easier for refiners to produce, and the drop in both crude prices and amount of driving during the fall.
"Everything is coalescing to send prices down this autumn like they normally do," said Tom Kloza, chief oil analyst for Gasbuddy.com. "We think this one is even going to be a little deeper."
Business on 09/18/2014