Fuel Prices Continue Their Slide
Pump prices logged another week of steep declines around the nation, the Energy Department said Monday, as oil dipped below $60 a barrel to the lowest level since March before rebounding slightly.
Behind the falling energy costs, which began their plunge in August, are plentiful oil and fuel supplies and an easing of the futures market’s worries about hurricanes, Iran’s nuclear program and other factors. The effect of those concerns on oil prices has become known as the “fear premium.”
Crude’s modest recovery Monday came as members of the Organization of the Petroleum Exporting Countries acknowledged that they had been talking about falling prices but had made no plans to meet before December. Oil ended the day at $61.45 a barrel, up 90 cents.
The average U.S. retail gasoline price dropped 11.9 cents to $2.378 for a gallon of self-serve regular gasoline, based on the Energy Department’s weekly survey of more than 800 service stations. Six weeks ago, the average was 66 cents higher at $3.038 a gallon. The latest U.S. average was 42.5 cents lower than the year-earlier tally.
California motorists saw the state average fall 8.8 cents to $2.76 a gallon in the last week, the government survey found. The price has declined by more than 45 cents since mid-August. Bargain hunters could find it for much less, such as the $2.49-a-gallon price spotted Monday at the EZ Gas station in Buena Park, according to OrangeCountyGasPrices.com.
At this time last year, the state average was nearly 19 cents higher.
Monday also marked the first time since mid-March that the average U.S. retail gasoline price fell below $100 for a 42-gallon barrel, said Tom Kloza, chief oil analyst for the Oil Price Information Service.
“We will go down again tomorrow and we will see prices drift lower all week. There is still plenty of relief ahead,” Kloza said, adding that a daily survey by the information service found gasoline selling for less than $2 a gallon in 17 states east of the Rocky Mountains.
The Energy Department said the cheapest fuel could be found in the Midwest, where the average price for a gallon of gasoline was $2.207, down more than 11 cents over the last week and more than 51 cents below the year-earlier average. One of the nation’s lowest prices was $1.89 a gallon, found at a Rhodes 101 gas station in Jackson, Mo., according to MissouriGasPrices.com.
Gasoline prices have plummeted along with oil, which peaked at $77.03 a barrel July 14 on the New York Mercantile Exchange.
In New York futures trading Monday, mild national and international news briefly sent the November crude oil contract as low as $59.52 a barrel, the cheapest intraday price since March 8.
Oil giant BP said it resumed production from the eastern portion of Prudhoe Bay oil field in Alaska, which was shut in early August after discovery of pipeline corrosion.
Also contributing to the decline was a Washington Post interview Sunday in which Iranian President Mahmoud Ahmadinejad said he was interested in conducting talks about his country’s nuclear enrichment program.
But prices rallied, which experts attributed to concerns that OPEC would cut production if oil prices fell much below $60 a barrel.
Two weeks ago, OPEC members agreed to leave their official output unchanged at 28 million barrels a day. Their next scheduled meeting is Dec. 14 in Abuja, Nigeria.
“OPEC was working the phones today. It seems like they are ready to defend prices if they go lower,” said John Kilduff, an energy analyst with Fimat USA Inc.
Phil Flynn, vice president and senior market analyst for Alaron Trading Corp., agreed that oil prices probably wouldn’t drop much more in the near future.
“I think we will start building a base around $60 a barrel and we could start going higher, depending on the news,” Flynn said.
