Analysts, however, say that drivers can relax a bit. They say these lower prices should last until early next year. The shortages ended yesterday, but drivers' pessimism remained. Almost without exception, they said they expect prices to go up at any moment.
While short-term [image-nocss] shortages might pop up, they are highly localized and do not indicate a larger problem, Roger Dreyer, president of the Ohio Petroleum Marketers & Convenience Store Association, told the newspaper. "The supply picture is such that [shortages] can happen any day," he said.
Customers have been battered by years of rising prices, with short-term drops usually followed by even greater increases. Although the level of volatility in recent months is unusual, it is normal for prices to drop this time of year, Tom Kloza, chief oil analyst for the Oil Price Information Service, told the Dispatch. "November through February are usually very weak months for gasoline prices in the Midwest," he said. The "bottom will occur between now and late February-that is very traditional."
Prices should stay near current levels for three or four months, Jim Ritterbusch, president of energy consultancy Ritterbusch & Associates, told the paper. "Four dollars was simply too high, and $2 is probably too low," he said of the outlook for 2009. (Click here for CSP Daily News coverage ConocoPhillips CEO Jim Mulva's prediction that gasoline prices will stabilize at $3 per gallon.)
Ritterbusch said he thinks a combination of factors will push prices up again next spring, including the announced export cutbacks by the Organization of the Petroleum Exporting Countries (OPEC), and the normal increase in demand that comes with warm weather. But when prices rise, he does not expect a return to $4 per gallon. He predicts the average price for 2009 will be about $2.75.
The rapid drop in gasoline prices may slow with OPEC cuts in oil production, analysts said Monday, according to The Greenville News. "We are watching to see what the impact will be," Carol Gifford, a spokesperson for AAA of the Carolinas, told the paper. OPEC said it would cut oil production by 1.5 million barrels a day effective November 1.
The average price for regular gasoline in this region was $2.19 early Monday. But motorists were able to purchase a gallon for less than $2 at places such as Costco and Raceway, said the report.
Gifford said the demand for oil is dropping in the international market and that has translated into price declines in the domestic market. "We have seen motorists change their driving habits based on the high cost of gasoline," Gifford said. "Because they're driving less, there's less demand for gasoline."
The economic downturn is also affecting gas prices, Gifford said. Light, sweet crude for December delivery that had crested above $69 in early trading tumbled $3.31 to $64.50 a barrel on the New York Mercantile Exchange. But the biggest declines were in gasoline futures, where prices dropped more than 7% in early trading.
Declining gasoline futures have led to sharp drops in the price of gasoline. The price for a regular gallon of gasoline dropped to $1.41 nationally on Monday, down more than 30% from last month, according to auto club AAA, the Oil Price Information Service and Wright Express.
Oil prices have fallen about 54% since peaking above $147 a barrel in mid-July. In October alone, crude prices tumbled 32%.
Venezuela's oil minister, Rafael Ramirez, has said OPEC will need to cut production by at least another one million barrels daily to stop the fall.
Victor Shum, an energy analyst at Purvin & Gertz, said that OPEC's recent output cut offset the decline in demand, but a second cut may help tighten supply in the market and support oil prices in the long run.
Gifford said it is hard to project what will happen to gas prices with the decreased production and "we try not to. "But what we think might happen with the decreased production of oil is the drop in prices may slow down," she told the paper. Prices "may go back up a bit once we get to the holiday travel time, but we don't think we'll see the prices go back up because of decreased production. Prices are now significantly lower than they were a year ago."
Members help make our journalism possible. Become a CSP member today and unlock exclusive benefits, including unlimited access to all of our content. Sign up here.