CAMARILLO, Calif. -- The U.S. average regular grade retail gasoline price was $3.3079 on October 10, down 35.03 cents per gallon since September 26, according to the most recentLundberg Survey of approximately 7,000 U.S. gas stations. This is the biggest price drop in the history of the American gasoline market, according to nearly six decades of Lundberg Survey data gathering. It exceeds by about a dime the prior record drop in October 2005, when gasoline supply was normalizing after damage from Hurricane Katrina.
Supply normalization [image-nocss] after Ike is coming on fast, and is mostly why the average retail price crashed 68 cents in Little Rock, 55 cents in Atlanta, and impressive amounts in other affected markets, from two weeks ago, contributing a bit to the big national retail price crash picture.
Further street price cutting can be expected if crude oil prices do not spike, which they appear very unlikely to do, because U.S. gasoline demand continues to shrink. More retail price cutting is likely also because retailers on average are holding a hot potato: high margins. They will seek to pass through any price cuts, as quickly and deeply as they can afford to do, to support sales. Such passthrough may amount to 25 cents per gallon in coming weeks.
On October 10, the benchmark oil price lost nearly another $9 per barrel from the day before. If that $77.70 price is sustained, then a total retail price decline of 50 cents per gallon in the near future would not be unrealistic.
Whether a 25- or 50-cent street price drop will kick in a return to gasoline demand growth will depend greatly on overall U.S. economic conditions.
While numerous officials and industry critics continue to cry "price gouging" following Hurricane Ike and just because they have learned that tune, still others are about to get the terrible idea that low prices are a good time to push for gasoline tax hikes. If this happens, the gasoline industry and consumers alike will need to push back mightily to avert economic harm.
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