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What Could Stop This Fall’s Gas Price Drop?

Seasonal shift portends lower prices, but one factor could stall the decline: AAA
Photograph courtesy of AAA

ORLANDO, Fla. — The national gasoline average could drop by more than 25 cents per gallon (CPG) from summer’s average to fall as lower crude prices and gasoline demand and a shift to less expensive winter blends weigh it down, AAA has forecasted. But one event could stop such a large decline: hurricanes.

AAA is forecasting a national average of $2.40 per gallon or lower for fall 2019. As of Aug. 22, when the organization released its fall forecast, the national average was already 15 CPG lower than five weeks earlier.

“AAA predicts that fall gasoline prices will be significantly less expensive than this summer with motorists finding savings in every market across the country,” said Jeanette Casselano, spokesperson for the Orlando, Fla.-based group. “Many factors are driving this decrease, but the low price of crude oil is chief among them.”

AAA expects oil prices to range from $50 to $60 per barrel this fall, compared to $60 to $75 per barrel in fall 2018. It cited higher crude inventories, which are 31.5 million barrels higher than this same time last year. Despite an agreement by the Organization of the Petroleum Exporting Countries (OPEC) and partner countries to hold to their 1.2 million bpd production cut through the end of 2019, higher oil prices have failed to hold up.

Regional Factors

Gasoline price trends will vary by region:

  • The West Coast, which typically has the highest gasoline averages, is seeing some price relief this fall thanks to swelling supply. All seven states in the region except for Arizona have averages of $3.01 or more. With fall’s lower demand, AAA expects the region’s gas prices to drop further into the year.
  • In the Great Lakes and Central States, AAA expects prices to decline as demand slumps, “but that won’t stop the typically volatile region from being susceptible to sudden price shocks,” the forecast said.
  • Gasoline inventories in the Mid-Atlantic region and the Northeast are 3 million barrels less than this same time last year, which AAA partly blames on the expected closure of Philadelphia Energy Solutions, one of the East Coast’s largest refineries. So far, imports have kept the supply constraints from affecting gas prices, although AAA warns that additional supply issues could spike prices temporarily.
  • AAA is expecting some of the lowest gas price averages in the South and Southeast, thanks to the region’s high inventory levels and refinery utilization. Barring any major events, gas prices could fall below $2 per gallon by the end of 2019.
  • The Rockies saw lower summer gas prices than in 2018, with Utah and Idaho’s averages staying below $3 per gallon for the entire month of July. With the second half of the year’s lower demand, AAA expects prices to stay subdued thanks to the region’s record-high gasoline stocks.

These forecasts for lower prices depend on one powerful, unknown factor: hurricanes. The National Oceanic and Atmospheric Administration has predicted an above-normal hurricane season in the Atlantic, with five to nine hurricanes out of 10 to 17 major, named storms. Even the threat of a hurricane making landfall can trigger crude and fuel price spikes, AAA said, citing the 30-CPG jump in the national gasoline average during Hurricane Harvey in 2017.

 

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