HOUSTON — Some drivers may have done double-takes this week when they saw an eye-popping number in Houston: Two.
As in $2.99 or less for a gallon of regular gasoline.
The consumer gasoline information website GasBuddy reported that several stations dotting the edge of the city joined the 21 percent of Texas gasoline retailers advertising regular below $3 per gallon on Thursday.
The Houston average was just over a nickel higher at $3.05, according to the motor travel club AAA, but it’s inching toward the sub-$3 mark that area motorists haven’t seen since February 2011. It’s more than a seasonal dip.
Abundant inventories and a shrinking appetite for gasoline have amplified the typical winter-time decline in prices, and they probably will sink lower as the weather chills and fewer Americans take long trips. No big storms interfered with refining on the Gulf Coast this year, and new refinery upgrades to expand production capacity have pushed gasoline supplies higher in recent months.
Even the U.S. shale boom has played a role: Higher-grade light crudes extracted from those tight rock formations produce more gasoline than heavier crudes.
“The market is more than adequately supplied,” said Andy Lipow, president of Houston-based consulting firm Lipow Oil Associates.
Nationwide, a gallon of regular averaged $3.33 on Thursday, 30 cents lower than a year ago. Lipow said he expects that to drop below $3.20 in coming months.
“That’s a big difference, one that a lot of people will notice, especially in Texas where prices are hurtling below $3 a gallon,” said Michael Green, a spokesman for AAA. Green said prices will keep dropping as demand shrinks and supply grows.
“It’s simple economics,” he said.
U.S. demand for gasoline dropped to 8.8 million barrels per day in the week ending Oct. 19, down from 9 million barrels per day the week before. Meanwhile, the country’s gasoline inventory jumped to 9.1 million barrels per day last week from 8.9 million barrels the week ended Oct. 12, according to the Energy Information Administration.
Pumping gas in Houston is 17 cents a gallon cheaper than a month ago and down from $3.40 this time last year, according to AAA.
The decline comes as prices for U.S. benchmark West Texas Intermediate crude have fallen. It closed at $97.11 a barrel in trading Thursday on the New York Mercantile Exchange, up 25 cents for the day but down more than $3 from a week earlier and more than $10 since early September.
Crude accounts for about 70 percent of the price tag for gasoline.
Traders sent oil prices down after the U.S. Energy Information Administration reported this week U.S. crude production hit a four-month high of 379.8 million barrels in the week ended Oct. 18.
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Lipow said his projection for crude is $93 per barrel in coming months.
Higher-price international benchmark Brent crude has followed a similar trajectory, and closed at $106.99 on Thursday.
Global geopolitical issues hampering oil production, including tensions in oil-producing Iran, seem to have cooled off in recent weeks. And refining activity on the Gulf Coast has hit a lull as refiners enter a maintenance period that will produce a backlog of oil, said Denton Cinquegrana, chief oil analyst at Oil Price Information Service.
More oil typically means lower prices.
“Crude oil inventories have built up. We’re going to see more of that in the next four to six weeks,” Cinquegrana said. It’s good news for U.S. consumers, who may become less stingy with more money in their pocket, but it probably won’t make for a better holiday season for oil companies, he added.
What’s the lowest price you’ve paid for gasoline in the past month? Let us know in a comment below.
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