Gasoline Prices Decline Again
Motorists are seeing some relief at the pump, but volatile changes in oil prices are leaving big questions as to whether gasoline prices will continue their slow decline.
California motorists paid an average of $2.565 a gallon for regular self-serve gasoline for the week ended Monday, down nearly 2 cents from the previous week, according to the Energy Information Administration, the statistics arm of the Energy Department. The U.S. average fell one-tenth of a penny to $2.236 a gallon.
Los Angeles motorists paid $2.579 a gallon, down 1.5 cents from a week ago.
After climbing for much of the year, U.S. and state gasoline prices have declined for the last two weeks. But both the California and U.S. averages are still more than 40 cents a gallon higher than a year ago.
“These prices are coming down. They’re coming down slowly, but they are coming down steadily,” said Paul Gonzales, a spokesman for the Automobile Club of Southern California.
But fluctuations in the price of crude oil futures could complicate a decline in gasoline prices. Oil accounts for about half the cost of gasoline at the pump.
The U.S. benchmark light sweet crude closed at a record high of $57.27 a barrel on April 1 on the New York Mercantile Exchange. The price then slid to close at a two-month low April 13 at $50.22 a barrel.
Then last week, oil futures shot up 10% over a four-day rally, finishing at $55.39 a barrel Friday. During Monday trading, oil neared $56 before closing down 82 cents to $54.57 a barrel on the Nymex.
Some analysts say it’s difficult to tell where oil and gas prices will go next.
“On balance, it’s still showing the signs of a hyped-up market versus an appropriately valued market,” said Tom Kloza, chief analyst for Oil Price Information Service.
Kloza noted a number of events that could affect oil prices, depending on how investors interpret them. They include Valero Energy Corp.’s announcement Monday that it would spend $6.9 billion on Premcor Inc., which would create the nation’s largest fuel refiner, and the results of a meeting between President Bush and Crown Prince Abdullah of Saudi Arabia in Crawford, Texas.
Abdullah gave Bush details about a Saudi plan to increase oil production capacity to 12.5 million barrels a day by 2009, a White House official said.
Although that investment wouldn’t immediately ease oil prices, the Saudis also said they would pump all the oil their customers want to buy, up to the current capacity of about 11 million barrels a day.
Kloza said oil and gasoline prices were still too high and should be falling, because “there’s plenty of crude out there,” at least through mid-summer.
But “there’s so much speculative investment money on ... the crude oil markets that it doesn’t take long to spook” investors, Kloza said, which could further ratchet up the price of oil on the commodity markets.
