TAMPA, Fla.,– The falling price of oil dragged gas prices lower last week. The national average price for a gallon of regular unleaded is $2.30, down 1-cent from the week before, a downward trend that is likely to continue in the near future.
“The oil market suffered a ‘mini collapse’ last week, following reports of a record build in domestic crude oil,” said Mark Jenkins, spokesman, AAA – The Auto Club Group. “This will postpone the customary spring-time gas price spike. Prices could drop 5-10 cents in the short term, but this downward trend may only be temporary.”
Up until last week, crude oil had held steady all year – averaging nearly $53 a barrel. Prices initially rose to that level on November 30, when OPEC agreed to cut production by some 1.2 million barrels per day, in effort to reduce the global oversupply of oil. As OPEC implemented their cuts, the U.S. ramped-up production and supplies. Domestic production rose 1.6 percent since the beginning of the year. Crude inventories also climbed a total 9 percent. Inventories first reached a new all-time high four weeks ago, and have grown every week since. The oil market finally responded after this week’s EIA petroleum numbers were released. Friday’s daily settlement of $48.49 per barrel is the lowest since November 29, 2016 (the day before the OPEC agreement).
“Despite OPEC’s efforts to balance the market, traders were reminded this week that the global glut in oil still lingers,” Jenkins continued. “Although it could take several weeks, analysts believe oil prices could recover by the time OPEC meets again in May. Meanwhile, refineries will have to battle rising demand as they begin pumping summer-blend gasoline into the market in April and May. All these factors could push pump prices 20-40 cents higher by Memorial Day.”
Demand has been sluggish so far this year, yet it rose 7 percent last week, according to the EIA. Total gasoline supplies are also down 2.6 percent. These fundamental shifts would normally push gas prices higher, but are not strong enough to outweigh the downward pressure from falling oil prices, which dramatically influence the cost of producing gasoline.