Gas prices may be at bottom
Updated 10/6/2006 12:14 AM ET
By Barbara Hagenbaugh, USA TODAY
WASHINGTON — Many drivers who are hoping for sub-$2 a gallon gasoline in the near future will likely be disappointed.
The price at the pump, which until recently was rapidly plunging, has been declining at a slower rate in recent days. Such a slowdown suggests retail gasoline prices at the end of October will likely still be above $2 a gallon in most parts of the USA, according to a number of energy analysts, including those from Wachovia, Oil Price Information Service, Cameron Hanover and Moody's Economy.com.
The nationwide average price for a gallon of regular gasoline was $2.290 Thursday, down a half-cent from the day before and 44 cents below a month ago, according to motor club AAA. The U.S. average gasoline prices is down nearly 25% from the peak of $3.036 hit two months ago.
Gasoline prices have been falling because of a sharp drop in the cost of oil, which accounts for more than half the retail price of gasoline. But experts believe the nationwide average price won't drop much further for two main reasons:
•Refineries. Some refineries typically reduce production in the fall months for regular maintenance. But with gas prices lower, refineries may scale back even more than usual, Moody's Economy.com economist Rakesh Shankar says. Such a decline in refining will reduce gasoline supplies, which is likely to help prop up prices.
Some of that is already happening. Refineries were operating at 89.9% of their potential capacity last week, down from 92.4% in the prior week and the lowest percentage since mid-May, the Energy Department's Energy Information Administration said Wednesday.
•Oil. Oil prices have dropped 24% in the last three months and dipped below $60 a barrel for the first time in nearly eight months Tuesday. But although prices are expected to drop a bit further, the floor is likely not too far away, says Peter Beutel, president of Cameron Hanover, an energy consulting firm.
"There are a lot of reasons why this market should rally," he says.
Oil prices rose Thursday amid reports OPEC was preparing to cut production to stem falling prices, although the organization of oil producers has not announced any official cutbacks. The price of oil trading for future delivery rose 79 cents to $60.20 a barrel.
Still, some consumers may see gas prices below $2 a gallon. OPIS analyst Tom Kloza says there is "great diversity" in prices across the USA."If you were traveling from Maine to New Orleans, you could almost plan your trip with stops where you could get gas below $2 if you were going away for Halloween," Kloza says.
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