Motorists in Arkansas and the rest of the nation should get used to filling up their tanks for less after the U.S. Department of Energy forecasted on Tuesday that average pump prices for regular unleaded should remain on average below $2 per gallon throughout 2016.
In the near-term, a GasBuddy analyst said the bloated wholesale market for gasoline could also push pump prices in some parts of the U.S. below the one dollar a gallon mark in coming weeks, a level not seen since 1999.
“As gasoline supplies continues to bulge, prices continue to shrink,” said Patrick DeHaan, senior petroleum analyst for GasBuddy. “Wholesale gasoline prices in the Midwest have lost more than half of their value since the beginning of the year and prices at the pump haven’t fully reflected that yet. Incredible as it sounds, we wouldn’t be shocked to see a few stations in these states as low as 99 cents a gallon.”
DeHaan made his prediction after the U.S. Energy Information Administration’s released its monthly short-term energy forecast today (Feb. 9), predicting that the U.S. retail regular gasoline price will average only $1.98 per gallon in 2016 and $2.21 per gallon in 2017, compared with $2.43 per gal in 2015.
In January, the average national retail regular gasoline price was $1.95 per gallon, a decrease of nine cents from December and the first time monthly gasoline prices averaged below $2 per gal since March 2009. EIA expects the monthly average retail price of U.S. regular gasoline to reach a seven-year low of $1.82 per gallon in February 2016, before rising during the spring.
CRUDE OIL STOCKPILES AT HIGHEST LEVEL IN NEARLY EIGHT DECADES
Nationwide, domestic crude oil inventories reached their highest level for this time of year in nearly eight decades, and barring any major disruptions in supply, gas prices are likely to remain near their lowest price point since the Great Recession, AAA officials said.
Gasoline demand typically begins to increase starting in February, reaching its peak in August, and this month also marks the beginning of the spring refinery maintenance season. The combination of increased demand and reduced supply often leads to upward swings in the price at the pump, and historically, as a result, averages have climbed higher during this seven-month period (February – August).
Unlike previous years, both gasoline and crude oil supplies are at record levels and two of the nation’s more volatile markets, the Midwest and the West, are both reporting ample supply. The convergence of these factors may point to a possible shift in the status quo, provided crude oil prices remain relatively low and absent any major disruptions in supply or production, AAA officials said.
According to AAA, today’s average price of $1.72 per gallon reflects a savings of $1.09 per gallon versus the 2015 peak price reached this past June, and gas prices have fallen for 32 of the past 34 days. Pump prices are down seven cents per gallon on the week, 25 cents per gallon on the month, and consumers are saving 45 cents per gallon versus this same date last year.
Drivers in 44 states continue to pay gas prices below $2 per gallon. Oklahoma ($1.42) and Missouri ($1.43) are the nation’s least expensive markets and a total of 30 states are posting averages at or below $1.75 per gallon. Hawaii ($2.63) leads the market with a pump price that is double-digits above second-place California ($2.50). Regional neighbors Alaska ($2.34), Nevada ($2.20) and Washington ($2.09) join in the rankings and round out the nation’s top five most expensive markets for retail gasoline.
ARKANSAS PUMP PRICES AVERAGE $1.53 A GALLON
In Arkansas, pump prices across the state have fallen on average about 20 cents below the national price. The current average price for regular unleaded across the states held steady at $1.53 a gallon, which is down five cents from a week ago and 51 cents below year-ago levels.
Pump prices in the state’s metropolitan areas range from a low of $1.35 and $1.37 per gallon in Northwest Arkansas and the Fort Smith area, respectively, to a high of $1.61 per gallon in Pine Bluff. Motorists in the Little Rock metropolitan area and the Texarkana state line are seeing prices at an average of $1.56 per gallon.
Drivers choosing to fill up their tanks with a higher-grade of gasoline should expect to pay an average premium of $2.03 a gallon across the state. Big rig drivers and other diesel fuel users will see pump prices at about $1.81 a gallon, down from $2.61 per gallon from a year ago. According to GasBuddy.com, there are several gas stations in Northwest Arkansas and the Fort Smith area that are posting pump prices as low as $1.26 and $1.27 for a gallon of regular unleaded.
Will Speer, GasBuddy’s energy analyst for the Southwest region, said the wholesale gasoline price in Arkansas and surrounding Gulf Coast states is not as “out of whack” as the Midwest region where refineries are operating at full capacity with no market for bloated supplies.
“We will not see the (wholesale) discount that you are seeing in Oklahoma, Illinois and other areas of the Midwest where there is a refinery in their backyards,” Speer said. “We are near to the best prices we will see as they start to go back up before refineries switch over to the (summer) fuels.”
Despite the declining fuel costs, a survey today by the National Association of Convenience Stores (NACS) said lower gas prices don’t appear to be translating into increased driving or spending. Only one in six consumers (16%) say they will be driving more over the next month, the lowest level in three years. And only one in five consumers (21%) say they will spend more this month. Millennials are the most likely to increase their driving (30%) and spending (36%).
Consumers clearly have noticed lower gas prices, however. Three in four Americans (74%) say that gas prices are lower this month, the highest percentage noticing lower prices since December 2014. And two in three (65%) drivers think gas prices in the next 30 days will be about the same or lower.
“Consumers are very aware of lower gas prices but it isn’t translating into positive feelings about the economy,” said Jeff Lenard, NACS vice president of strategic industry initiatives. “We will be closely watching how the petroleum industry’s spring transition to summer-blend fuels could affect gas prices, consumer sentiment and spending over the next few months.”
Following are other highlights of EIA’s January short-term energy outlook.
• West Texas Intermediate (WTI) crude oil prices and international Brent prices are forecasted to average $38 per barrel in 2016 and $50 per barrel in 2017. However, the current values of futures and options contracts continue to suggest high uncertainty in the price outlook, the EIA said.
• U.S. crude oil production averaged an estimated 9.4 million barrels per day in 2015, and it is forecast to average 8.7 million per day in 2016 and 8.5 million per day in 2017. EIA estimates that crude oil production in January was 70,000 per day below the December level, which was 9.2 million per day.
• Natural gas working inventories were 2,934 billion cubic feet (Bcf) on January 29, 20% higher than during the same week last year and 18% 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 2,096 Bcf, which would be 41% above the level at the same time last year. Henry Hub spot prices are forecast to average $2.64 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.