Gas Prices Take Biggest Fall Since Gulf Crisis Began : Energy: The average price for all grades dropped almost 6 cents a gallon. It indicates that retail levels are catching up with an easing in wholesale levels.
Motorists got an early Christmas present as gasoline prices nationally plunged nearly 6 cents a gallon over the last two weeks, their biggest dive since Iraq invaded Kuwait on Aug. 2, a national survey reported Sunday.
The average price for all grades of gasoline at full- and self-serve stations was $1.4027 a gallon Friday, 5.79 cents below the level of Dec. 7, according to the Lundberg Survey, a widely followed survey of 13,600 gasoline stations.
It was the largest decline since the Persian Gulf crisis began, and reflected the falling wholesale price of gasoline and the price of crude oil, from which gasoline is refined.
“It’s just a matter of the retail prices catching up with the reduction in the price at the wholesale level,” said industry consultant McDonald J. Beavers, president of Whitney Leigh Corp. in Tulsa, Okla.
He added that retail prices have lagged the decline in other prices by several weeks, which is typical.
Crude oil prices peaked in mid-October at more than $41 a barrel, but have since fallen to about $26 last week.
That’s because traders have stripped out the so-called war premium from oil prices, apparently believing that there is little likelihood of war breaking out and disrupting world oil supplies--at least not before the Jan. 15 deadline set by President Bush for Iraq to pull out of Kuwait.
“At the same time, futures prices for unleaded gasoline have been falling precipitously, which was fairly quickly reflected in spot and wholesale prices” for gasoline, Beavers said. “There was a several-week lag at the retail level.”
The decline in retail gasoline prices has lagged that of wholesale prices in part because of recent increases in local and federal gasoline taxes.
A 5-cent-a-gallon California gasoline tax went into effect Aug. 1, the day before Iraq invaded Kuwait. And on Dec. 1, a nickel-a-gallon tax went into effect nationally as part of the budget compromise bill passed by Congress.
The lag could also be attributed in part to retailers making up for some profits lost while crude oil prices were skyrocketing.
“Gasoline prices at retail have been coming down slower than crude (prices), but they were slower on the rise,” said Philip K. Verleger Jr., an economist and visiting fellow with the Institute for International Economics in Washington.
The North Hollywood-based Lundberg Survey reported that regular unleaded gasoline at self-serve pumps, the most popular grade, sold last week for an average of $1.2885 a gallon nationally.
The average price of regular self-serve leaded gasoline was $1.2587 a gallon, and premium unleaded sold for $1.4479 a gallon, the survey reported.
At pricier full-service pumps, regular unleaded averaged $1.5394 a gallon, regular leaded $1.5231 a gallon and premium unleaded $1.6762 cents.
Prices are likely to remain low, especially given the relatively stagnant demand for gasoline during the winter months, analysts said.
“I think we’re looking probably at lower prices in 1991,” Verleger said. “The stocks are fairly high for crude oil, and they are building. At the same time, if you look at the economic situation . . . prospects look pretty awful. . . . Taken all together, it says that demand (for petroleum) will be lower next year, rather than higher.”
