According to the US Energy Information Administration (EIA), US retail regular grade gasoline prices continue to decline, averaging US$ 2.82/gal. as of 24 November. This average is 47 cents lower than a year ago, and the lowest price heading into a Thanksgiving holiday since 2009.
Traditionally, the Thanksgiving holiday is one of the most traveled times of year in the US, and much of that is travelled by car. AAA estimates that during this Thanksgiving holiday weekend (26 – 30 November), 41.3 million people in the US will travel more than 50 miles from home by car. This level of travel, 4.3% higher than the same time last year, is the highest number of travelers by car for Thanksgiving in seven years and the third highest since AAA began publishing data in 2000.
Gasoline prices across the country reflect differences in gasoline quality, taxes, and the characteristics of regional supply and demand balances. West Coast prices typically exceed the US average because of stricter fuel specifications in California and the region’s isolation from other domestic markets. Regional differences in gasoline prices are also attributable to variations in state and local taxes and differences in regional supply costs.
Much of the decline in gasoline price since mid-2014 is attributable to falling crude oil prices. The combination of robust US crude oil production growth, a return of Libyan production (despite recent setbacks), weakening expectations for the global economy (particularly in China), and seasonally low refinery demand has reduced oil prices. North Sea Brent spot prices haven fallen from a July monthly average of US$ 112/bbl to a November monthly average of US$ 80/bbl (through 24 November). The average US retail regular grade gasoline price has fallen 88 cents/gal. since the start of July.
EIA’s November 2014 Short Term Energy Outlook (STEO) projects the US average retail price of regular gasoline will continue to decline for the remainder of the year and will average US$ 2.80/gal. in December. The STEO forecast of annual average US regular gasoline retail prices is US$ 3.39/gal. in 2014 and US$ 2.94/gal. in 2015, well below the US$ 3.51/gal. price in 2013. However, as discussed in the STEO, the current value of futures and options contracts implies a wide confidence interval for forecasts of crude oil, which is the main determinant for gasoline prices.
Adapted from a press release by Emma McAleavey.
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