Gas prices to remain low until spring when refiners switch fuel blends

Arkansas and U.S. motorists can expect to fill-up their tanks at well below $2 a gallon gasoline through February before pump prices rise ahead of the usual spring run-up as U.S. refiners begin switching to summer fuel blends, according to the U.S. Department of Energy’s (DOE) monthly short-term energy outlook.

The U.S. Energy Information Administration (EIA), the statistical research arm of the DOE, said Tuesday (Jan. 12) it expects monthly retail prices for U.S. regular gasoline to reach a seven-year low of $1.90 per gallon in February 2016, down from the current average of nearly $1.95 per gallon nationwide. The price of U.S. retail regular gasoline is forecasted to average $2.03 per gallon in 2016 and $2.21 per gallon in 2017, compared with $2.43 per gallon.

In December, average retail regular gasoline prices were $2.04 per gallon, a decrease of 12 cents per gallon from November and 51 cents per gallon lower than in December 2014. According to AAA, Gas prices continue to breach multi-year lows, with today’s average price of $1.97 per gallon representing the cheapest average price at the pump since March 23, 2009.

Gas prices have fallen for 55 of the past 66 days for a total savings of 26 cents per gallon and should remain relatively low because there is more than enough oil and gasoline around the world to meet demand. Drivers are saving three cents per gallon on the week, five cents per gallon on the month and 17 cents per gallon versus this same date last year.

As a result of supply challenges, California ($2.86) remains the most expensive market for gas ahead of second-place Hawaii ($2.67). Regional neighbors Nevada ($2.49), Alaska ($2.47) and Washington ($2.42) round out the nation’s top five most expensive markets for retail gasoline.

On the other end of the spectrum, Missouri ($1.66) and Oklahoma ($1.70) are the nation’s least expensive markets for retail gasoline. Motorists in 36 states are paying an average of less than $2 per gallon at the pump, and retail averages in 10 states are at or below the $1.75 per gallon benchmark.

ARKANSAS PRICES
In Arkansas, cheap holiday pump prices have extended well into the new year, dropping well below the national average with many in the state able to fill up for about $1.71 per gallon, according to AAA’s daily fuel gauge on Wednesday (Jan. 13).

Depending on the region, the spread for average gasoline prices in the state’s metropolitan areas ranged as much as 30 cents. Drivers in the Fort Smith area and Northwest Arkansas are seeing the lowest prices at $1.60 and $1.61 per gallon, respectively. But motorist passing through central Arkansas in Little Rock and Pine Bluff are seeing higher prices at recorded average prices of 1.73 and 1.77 per gallon on those respective cities. At the Texarkana state line, most consumers are paying about $1.71 per gallon to fill up their tanks with regular unleaded fuel.

Drivers choosing to fill up the tanks with a higher-grade of gasoline should expect to pay an average premium of $2.06 a gallon across the state. Big rig drivers and other diesel fuel users will see pump prices at about $1.79 a gallon, down from $2.60 per gallon from a year ago. GasBuddy.com data shows there are several gas stations in the Fort Smith, Siloam Springs and Springdale posting pump prices as below $1.50 for a gallon of regular unleaded. At the Sunshine gas station in Siloam Springs near the Oklahoma/Arkansas state line, motorists only have to pay $1.39 per gallon to fill up their tanks with regular unleaded, the cheapest gasoline price in the state.

The falling pump prices are direct result of lower domestic and international crude oil prices, which are expected to remain low as supply continues to outpace demand in 2016 and more crude oil is placed into storage, the EIA said.

The Department of Energy statistical research group estimates that global oil inventories increased by 1.9 million barrels per day in 2015, marking the second consecutive year of inventory builds. Inventories are forecast to rise by an additional 700,000 barrels per day in 2016, before the global oil market becomes relatively balanced in 2017.

The first forecasted draw on global oil stockpiles is expected in the third quarter of 2017, marking the end of 14 consecutive quarters of inventory builds. In its first short-term forecast for 2016, the EIA said Tuesday that international Brent crude oil prices will average $40 per barrel in 2016 and $50 per barrel in 2017. West Texas Intermediate (WTI), the U.S. benchmark crude, is expected to be $2 and $3 a barrel cheaper than Brent in 2016 and 2017, respectively.

Following are other highlights of EIA’s January short-term energy outlook.
• Henry Hub spot prices for natural gas will average $2.65 per million per million British thermal units (MMBtu) in 2016 and $3.22 per MMBtu in 2017, compared with an average of $2.63 per MMBtu in 2015. Although annual average prices for 2015 and 2016 are similar, prices are forecast to rise through much of 2016, from prices that began the year near $2 per MMBtu. Price increases reflect consumption growth, mainly from the industrial sector, that outpaces production growth in 2016.

• Natural gas working inventories were 3,643 billion cubic feet (Bcf) on Jan. 1, which was 17% higher than during the same week last year and 15% higher than the previous five-year average (2011-15) for that week.

• EIA forecasts that inventories will end the winter heating season (March 31) at 2,043 Bcf, which would be 38% above the level at the same time last year. Forecast Henry Hub spot prices average $2.65 per MMBtu in 2016 and $3.22 per MMBtu in 2017, compared with an average of $2.63 per MMBtu in 2015.

• A decline in power generation from fossil fuels in the forecast period is offset by an increase from renewable sources. The share of generation from natural gas falls from 33% in 2015 to 31% in 2017, and coal falls from 34% to 33%.

• For renewables, the forecast share of total generation supplied by hydropower rises from 6% in 2015 to 7% in 2017, and the forecast share for other renewables increases from 7% in 2015 to 9% in 2017.

• EIA estimates that petroleum and other liquid fuels production in countries outside of the Organization of the Petroleum Exporting Countries (OPEC) grew by 1.3 million barrels per day in 2015. The 2015 growth occurred mainly in North America. EIA expects non-OPEC production to decline by 6000,000 barrels per day in 2016, which would be the first decline since 2008. Most of the forecast decline in 2016 is expected to be in the United States. Non-OPEC production is forecast to decrease by an additional 100,000 barrels per day in 2017.