Gasoline could drop 50 cents/gallon by spring

Print | Close this window Gasoline could drop 50 cents/gallon by spring Wed Feb 6, 2008 2:14pm EST

By Timothy Gardner

NEW YORK (Reuters) - U.S. drivers could enjoy a drop of up to 50 cents per gallon in gasoline prices by this spring as high fuel prices and the threat of a recession force them to conserve, experts said on Wednesday.

U.S. gasoline supplies hit a near-14-year high of 227.5 million barrels last week, helped by falling demand for the fuel, the U.S. Energy Information Administration said on Wednesday.

"Gasoline stocks are continuing to increase and it implies that people are probably cutting down on gasoline consumption -- a result of the weakening economy," said Phil Flynn, an analyst at Alaron Trading in Chicago.

U.S. gasoline demand over the last four weeks only averaged about 1 percent more than the same period last year, the EIA said. Demand growth for the fuel has typically averaged about 1.5 to 2 percent a year and has been one of the major drivers of global oil markets.

"Something dramatic is occurring with consumer driving habits," Geoff Sundstrom, a spokesman for AAA motor club, said in a telephone interview. "These numbers, if sustained over next couple of weeks, should set the stage for a reversal of price forecasts."

He said U.S. gasoline prices in the spring could fall 50 cents a gallon from Wednesday's $2.98.

Spring gasoline prices in the world's largest energy consumer set the stage for fuel prices during the summer months when vacationers drive fuel demand to annual peaks.

FORECASTS

In December, when oil prices were trading closer to a record $100 a barrel, compared with Wednesday's level of $87 a barrel, AAA predicted spring gasoline prices could hit a new record high above $3.50 per gallon, with fuel in some regions of the country hitting above $4.00.

The EIA had forecast similar spring gasoline prices.

On Wednesday, EIA analyst Doug MacIntyre warned that unexpected maintenance or economic run cuts at oil refineries could spike gasoline prices at any time, especially since U.S. refineries last week were only running at 84.3 percent of capacity.

Even so, he said he "certainly" expects that his agency next month will publish lower spring gasoline price forecasts.

Sundstrom said drivers are buying less gasoline because they feel the pinch from high fuel prices that have clung to near $3.00 a gallon and fear a recession amid the housing downturn.

"High gasoline prices by themselves have never altered consumer driving habits," he said. "Only when combined with some other factor have they fallen. In this case, it's anxiety about a recession."

He said gasoline demand may have fallen because businesses are making fewer sales calls and short haul deliveries, while consumers may have curtailed some shopping trips.

The record average price for gasoline, nearly $3.23 a gallon, was hit on May 24 last year, according to AAA.

Reply to
dbu
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This is totally opposite a report that was out just a few days ago, speculating that regular grade gas will average around $3.50 a gallon by next summer. Who to believe? Mister B

Reply to
Mister Bear

"on behalf of the common good" - Hillary Clinton.

Talk like that should scare the bejeebers out of everyone. It sounds more like a quote from Hugo Chavez, the tin-horn dictator of Venezuela. Or maybe Fidel Castro.

Bottled water costs more than gasoline. Why don't the "do gooder" politicians go after the "big water" companies? Or how about questioning why college tuition costs outstrip just about everything in terms of cost/inflation? Where's the outrage? Mister B

Reply to
Mister Bear

They'll lower the price in the spring, hoping to crank up demand. Then, they'll raise it again around mid-June when people want to travel for summer vacations. The reason for the price hike will be the usual bullshit, like "The Middle East is a dangerous place", or "There might be a hurricane next month".

Reply to
JoeSpareBedroom

How do you think roads are built and plowed, sewers are dug, public schools are funded, people on Social Security get their money and health care, the military is funded, and parks are maintained? Hint: It is not a donation by Bill Gates.

No one is forcing people to buy bottled water. In fact, I wish people would stop buying bottled water. It takes resources to bottle the water and transport the water.

This is one of the many issues that have been brought up in the Presidential campaigns.

Jeff

Reply to
Jeff

Now someone's going to say that you don't *have* to buy gasoline, either. Ready?

Reply to
JoeSpareBedroom

If people could perfectly predict the future, people would make a fortune on the stock market. That rarely happens.

In the middle east, there have been some issues with internet service. Perhaps there will be other types of attacks in the middle east or political problems in another country that exports oil.

Jeff

Reply to
Jeff

I don't think they will lower gasoline prices to increase demand. They will sell it for as much as they can get.

Last May, gas prices were quite high, but people continued to buy gas all summer.

Jeff

Reply to
Jeff

The article is too simplistic anyway. The price of oil is largely determined by speculation. That should be illegal for a product so important to the economy. Other industries manage to hedge against price swings without exposing themselves to a market full of recreational traders. It's time for the oil companies to do the same thing.

Reply to
JoeSpareBedroom

Why? How else do expect the cost to be determined? Did we go through this when there was a democrat in the White House? He liked to wear sweaters, but, the price controls he put in place only lead to gasoline shortages.

What is more important than fuel for our houses and cars? Fuel for our bodies. And this stuff is traded on commodities markets, too.

The only way that the US can decrease the influence of speculation on oil costs has on our economy is to decrease the use of oil.

Oil is determined by a global economy, not just the US economy.

Stopping oil commodities trading in the US won't change speculation one bit, except that it won't be in NY. Buying futures also helps airlines and other big users of oil predict their future costs. And intelligent buying helps SouthWest to keep their costs down, too.

They're not recreational traders. They're traders who make a living at it. Please show us that these recreational traders have a great influence in the price of oil. Or that closing this market in the US will have any great influence on the price of oil.

Jeff

Reply to
Jeff

BLAM!

Reply to
Hachiroku

I'll tweeze this apart in more detail later. But for now, plenty of industries negotiate directly with their raw material suppliers, with no need for any sort of exchange in the supply chain. These industries are no less efficient than the oil business, and they manage to hedge without any problem at all. These industries are often vulnerable to factors totally beyond human control, and yet, they manage just fine.

Do you agree with some or all of this? If not, why not?

Reply to
JoeSpareBedroom

Hillary Clinton's comments, if true, absolutely should scare you. This kind of big brother threat is not like taxing for schools, sewers and schools. It's about arrogant abuse of government power, erosion of fundamental rights and confiscation of private property. We don't need this kind of bullying and threatening. If its the petro companies today, who's next? This is a page right from Hugo Chavez socialist playbook. Mister B

Reply to
Mister Bear

Maybe if it WERE a donation by Bill Gates, bridges wouldn't be falling down, water wouldn't be contaminated, schools would produce literate students, Socialist Insecurity wouldn't be necessary, the military would be protecting the US instead of policing 130 countries, and parks would be kept clean.

Nor gasoline.

But most of the candidates have the wrong answers.

Reply to
John Q. Public

Really? Much of the country is sadly lacking in mass transportation. If a working person has exhausted all the possibilities for alternatives to commuting with a car, how does that person have a choice with regard to buying gasoline?

Reply to
JoeSpareBedroom

Governments (federal & state) have mandates that add to the cost: Additives and seasonal reformulations, and "gasp" ethanol as part of the mix. You could very well boost miles per gallon by removing ethanol and using pure gas. Ironically, it is the ethanol industry that gets public subsidies, NOT the oil companies.

Ethanol, as presently funded and produced for use as motor vehicle fuel, is a total boondoggle ... an absolute failure in virtually every repect. But, if you have any brain at all ... you should already know that. Mister B

Reply to
Mister Bear

Probably all true, but not relevant to the subject of speculative exchanges in the oil supply chain.

Reply to
JoeSpareBedroom

At least 20 different formulas. Insane.

Not ironic - totally nuts.

Yep. A poor fuel and a squeeze on the sweetener market.

Don't count on that in a.a.toyota

Reply to
John Q. Public

A little quote, totally out of context? What should scare us is that people find these quotes informative.

Reply to
Jeff

You might want to check out Gates's foundation and the things that they support. You might also want to check out the market value of Microsoft and compare it to the cost that our infrastructure requires. You will find that Gates already supports education and that there isn't enough money there to repair all the bridges that need repair.

Please tell us what answers they have brought up and why they are wrong.

Jeff

Reply to
Jeff

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