Summer gas price to be 8 cents lower than previously expected

The U.S. retail price for regular gasoline is expected to be an average of $2.38 per gallon this summer, and if the projection holds true, it will be the second-lowest summer gasoline price since 2005, according to the U.S. Energy Information Administration. In summer 2016, the average price was $2.23 per gallon. https://www.eia.gov/

In April, the EIA projected gas prices for this summer (from April to September) would be an average of $2.46 per gallon. The decline in the projection is related to the decrease in crude oil prices.

The price of Brent crude oil is expected to be $50 per barrel this summer, down from the $54 per barrel projected in April. The price decline in crude oil comes after U.S. oil producers have ramped up drilling and production — “with many of them hedging at higher oil prices seen in early 2017 — and as Libya and Nigeria have produced at levels above expectations,” according to the EIA. The production increase has offset the cuts in production from members of the Organization of the Petroleum Exporting Countries (OPEC) and other leading exporters that hoped to reduce the high levels of oil inventories globally.

The $4 per barrel decrease of Brent crude oil translates into about a 10 cents per gallon decline in the price of gasoline. Every dollar of change in the price of a 42-gallon barrel of oil “results in about a 2.4 cent-per-gallon change in the price of gasoline,” according to the EIA. Higher wholesale margins for both refiners and distributors partially offset the 10 cents per gallon decrease in the price of Brent crude oil, leading to the 8 cent per gallon decline in the projected price of gas.

Gasoline wholesale margins, which is the difference between the wholesale price of gasoline and the price of Brent crude oil, are expected to be 47 cents per gallon this summer. Wholesale margins will decline to 28 cents per gallon in September, from a peak of 52 cents per gallon in June.

In Arkansas, the average price of regular gasoline is $2 per gallon, according to the AAA.