Gas prices may fall for summer season.
Gas prices are poised to fall as Memorial Day approaches, a welcome change for motorists who have gotten used to seeing increases cut into their summer vacation money.
Experts who had been predicting a national average of more than $3 per gallon by Memorial Day now say prices have probably peaked just beneath that threshold. Rising supplies and concerns about the global economy have helped send wholesale gasoline prices plummeting by 22 cents a gallon since last week.
"Gasoline supplies are about as good as they’ve ever been going into the summer driving season," says oil analyst Phil Flynn of PFGBest.
The decline in prices is starting to filter down to motorists, but it will take several weeks for the full effects to be reflected in pump prices, which average $2.90 nationwide.
The average price for regular gasoline on the Missouri side of the St. Louis area stood at $2.76 per gallon overnight, AAA said Wednesday. That’s down from $2.87 a week ago. In the Metro East area, the average price was $2.96 per gallon, down from $2.99 a week ago.
By summer, the nationwide average could be below last summer’s peak of about $2.70 a gallon, says Tom Kloza of Oil Price Information Service. In July 2008, the retail price of regular gasoline peaked at $4.11.
Analysts were forecasting a nationwide average well above $3 a gallon a few months ago. So what changed?
— The European debt crisis escalated. This undermined confidence in the strength of the global recovery and prompted analysts to lower energy demand forecasts. The crisis also sent institutional investors flocking to the dollar, a relative safe haven. And, these days, when the dollar goes up, the price of oil goes down.
— Supplies of gasoline have risen steadily. As of Friday, the U.S. had 222 million barrels in storage — about 5 percent more than a year ago. Output has been growing at a faster pace than demand.
— Political unrest in oil-producing nations has been muted. This is a wild card that could change quickly. But lately, violence in Nigeria and tension in the Middle East have been relatively minor, traders say.
The massive oil spill in the Gulf of Mexico has had no impact on fuel prices because it’s had only minimal impact on petroleum production, analysts say.
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