Fuel Prices Are Lower Now, but Analysts Warn of Short-Lived Relief at the Pump
Cheaper gasoline and oil showed up at service stations and futures markets Monday, but analysts warned that the relief probably would be temporary.
California’s average gasoline price fell nearly 8 cents a gallon and the U.S. average dropped more than 12 cents in the last week, a government survey found Monday, as the U.S. benchmark grade of crude oil moved lower for the fifth session.
Analysts attributed the gasoline decline to higher imports, which were attracted by record prices, and to lower fuel demand, which always happens at this time of year but was accelerated by consumers’ pump-price sticker shock. Oil prices slumped on relief that Hurricane Wilma bypassed the important Gulf of Mexico energy production region, traders said.
Although analysts predicted that gasoline could drop soon to prices not seen since last spring, they added that demand would rise again early next year and push pump prices up. Similarly, the oil price break will end as heavy winter use of petroleum products strains a market that is trying to recover from hurricanes Katrina and Rita.
“We will be searching for a bottom in gas prices in the next few weeks and based on where we have been, that bottom will look pretty good,” said Tom Kloza, chief oil analyst for the Oil Price Information Service, an energy research company. But Kloza added a cautionary note: “The elements that contrived to send [gas prices] higher will be back and they will be back with some of their friends.”
In the days after Katrina shut down offshore gulf oil and natural gas production platforms and onshore refineries, oil reached a record $69.81 a barrel in New York futures trading and the U.S. average price of self-serve regular gasoline hit a fresh high of $3.069 a gallon. California’s average, usually one of the highest in the nation, peaked at $3.056.
On Monday, the average price for a gallon of self-serve regular gasoline fell 7.5 cents to $2.827 in California and the U.S. average plunged 12.2 cents to $2.603, according to the weekly pricing survey by the Energy Department. Compared with a year ago, California’s average was 43.3 cents higher and the U.S. average was 57.1 cents higher.
The average diesel price fell 5.8 cents in California to $3.152 a gallon and slipped 0.9 cent nationwide to $3.157 a gallon.
Light, sweet crude oil for December delivery lost 31 cents to close at $60.32 a barrel, a three-month low on the New York Mercantile Exchange. The November contract for gasoline was down 5.83 cents to $1.582 a gallon. Heating oil for November fell 6.92 cents to $1.797 a gallon.
But with some experts predicting an unusually cold winter, natural gas for November delivery gained 13.2 cents to $13.004 per million British thermal units.
“There have been some early calls for a hard winter in the East and there was a storm premium built into these prices as well,” said Mike Fitzpatrick, vice president of energy risk management for Fimat USA Inc. “For the next little while we are going to trade sideways. I don’t think we are going to go much lower than this.”
Moreover, the experts warned that energy prices would remain under pressure because hurricane-damage repairs were proceeding slowly and were further delayed by some evacuations related to Hurricane Wilma. Nearly 68% of gulf oil production and nearly 55% of natural gas output remained shut down Monday, the federal Minerals Management Service said.
But there was some good news for motorists in hard-hit areas. Chevron and Texaco gasoline credit card holders in parts of Alabama, Mississippi, Louisiana and Texas will receive a discount of 5 cents a gallon for as many as 90 days starting next month, Chevron Corp. said.
