Gasoline prices in Arkansas are nearing a seven-month low and should continue to see a gradual decline through Labor Day until the end of the year, the Energy Information Administration’s (EIA) forecasted in its recent short-term U.S. energy outlook.
The EIA’s prediction – and pump prices that Arkansas motorists have seen in the months of June, July and August – are very unusual for the summer vacation season, when retail gasoline prices tend to peak during the high-demand, three-month period before Labor Day on Sept. 1, said AAA spokesman Avery Ash.
“Falling gas prices are nearly the opposite to what we usually see this time of year,“ Ash said. “Refineries are running at full tilt and there is more than enough gasoline in the market, which has helped bring down prices despite multiple overseas conflicts.”
According to the AAA’s monthly gas price report, the national average price of gas posted the largest July decline in six years with average prices dropping about 16 cents per gallon during the month. The report, which is culled from the EIA’s statistical data at the U.S. Department of Energy, also noted that in recent years gas prices have increased considerably in July due to significant demand and occasional problems with refinery production. From 2011-2013, for instance, gas prices nationally increased in July by an average of 16 cents per gallon.
But this year, Ash said, gas prices began the current slide in the final days of June. The national average price of gas has declined for 33 out of 34 days for a total of about 17 cents per gallon. Overall, the annual average so far this year is $3.53 per gallon, which is the lowest average for the first seven months of the year since 2010. Last year the national average through July 31 was $3.57 per gallon.
And the good news doesn’t stop there. Nationally, retail gasoline prices are projected to continue to decline to an average of $3.30 per gallon in December, the EIA predicted. If that forecast holds true, Arkansas motorists could possibly see pump prices around three dollars a gallon at Christmas. Traditionally, Arkansans pay 20 to 30 cents less than the average U.S. retail price for a gallon of gas, EIA statistics show.
For example, Arkansas motorists today are paying in average of $3.24 per gallon to fill up their tank across the state, 13 cents cheaper than on July 20, according to AAA’s daily fuel gauge. The national average price of gas is $3.44 per gallon, down 13 cents from a month ago and the lowest gas prices since the middle of March.
Pump prices in the state’s metropolitan areas range from a low of $3.19 per gallon in the Fayetteville-Springdale-Rogers area to a high of $3.29 at the Texarkana state line. Motorists in the Fort Smith area are seeing prices at an average of $3.19 per gallon and travelers and residents in Pine Bluff and the Little Rock-North Little Rock are paying an average of $3.21 and $3.23 a gallon to fill up their tanks, respectively.
Drivers choosing to fill up the tanks with a higher-grade of gasoline should expect to pay an average premium of $3.60 a gallon across the state. Big rig drivers and other diesel fuel users will see pump prices at about $3.72 a gallon, down five cents from a month ago.
And Arkansas motorists will likely see lower-than-expected gas prices heading into Labor Day weekend, the traditional end of the summer vacation season. AAA’s Ash said prices should remain at their current level or move lower as long as refinery production remains strong and oil costs do not rise due to unexpected issues.
“The biggest threat to continued falling prices would be a major hurricane striking the U.S. Gulf Coast,” Ash said. “Prices also could rise or remain flat if refineries cut back on production or if there are any major refinery outages.”
Meanwhile, the Energy Department’s upbeat outlook continues beyond 2014 as U.S. crude oil production is forecasted to reach record levels. The EIA said it expects regular gasoline retail prices to average $3.50 per gallon in 2014 and $3.46 gallon in 2015, compared with $3.51 per gallon in 2013.
Below are other highlights of the EIA’s short-term energy outlook.
• Total U.S. crude oil production averaged an estimated 8.5 million barrels per day (bbl/d) in July, the highest monthly level of production since April 1987. U.S. total crude oil production, which averaged 7.5 million bbl/d in 2013, is expected to average 8.5 million bbl/d in 2014 and 9.3 million bbl/d in 2015. The 2015 forecast represents the highest annual average level of oil production since 1972.
• “The growth in domestic production has contributed to a significant decline in petroleum imports,” the EIA said, noting that the share of total U.S. petroleum imports fell from 60% in 2005 to an average of 33% in 2013. EIA expects the net import share to decline to 22% in 2015, which would be the lowest level since 1970.
• EIA projects international Brent crude oil prices to average $107 per barrel over the second half of 2014 and $105 per barrel in 2015. West Texas Intermediate (WTI) crude oil prices fell from an average of $106 per barrel in June to $104 per barrel. The WTI discount to Brent, which averaged $11 per barrel in 2013, is expected to average $8 per barrel and $p per barrel in 2014 and 2015, respectively.
• “The market's perception of reduced risk to Iraqi oil exports and news regarding increasing Libyan oil exports contributed to a drop in the Brent crude oil spot price …,” the EIA said. On Tuesday, WTI crude futures traded at $92.91 a barrel on the New York Mercantile Exchange. Brent crude fell four cents to $101.56 in European trading, a 14-month low.
• Natural gas spot prices fell from $4.47 per million British thermal units (MMBtu) at the beginning of July to $3.78 per MMBtu at the end of the month as natural gas stock builds continued to outpace historical norms. EIA expects that the Henry Hub natural gas spot price, which averaged $3.73 per MMBtu in 2013, will average $4.46 per MMBtu in 2014 and $4.00 per MMBtu in 2015.
• Natural gas futures on NYMEX closed Tuesday up 8.5 cents to $3.87 MMBtu.