U.S. motorists may spend a record $491 billion for gasoline this year
U.S. motorists are on pace to spend $491 billion for gasoline this year, the most ever.
Fuel prices have been high this year because of expensive oil and increased exports of gasoline and diesel to other countries. Gasoline prices may decline for a few weeks after the switch to winter blends, which are less costly to produce than summer blends. But gas price woes won’t go away, experts said.
“The 30 days between now and mid-October will be the most hospitable days in the country for dropping prices,” said Tom Kloza, chief oil analyst for the Oil Price Information Service. “But then the drumbeats will start about fears of a second Arab Spring [of political unrest]. Demand outside of Europe and the U.S. continues to rise. By spring, Americans will be wrestling with $4 gasoline in a lot of markets.”
The average U.S. price for a gallon of regular gasoline reached $3.661 on Monday, according to the U.S. Energy Department’s weekly survey of service stations. That was down 1.3 cents a gallon from a week earlier but up 94 cents from a year earlier.
In California, the average hit $3.944, unchanged from a week earlier and 92 cents higher than a year earlier.
Both the U.S. and California averages were well short of the all-time highs set in 2008 of $4.114 and $4.588, respectively. But overall, drivers have shelled out more for fuel this year than in 2008 because prices rose faster this time and have stayed high longer.
The 2008 average U.S. price was about $3.25 a gallon, said Kloza, who came up with the estimate of $491 billion in gasoline costs for 2011. This year, Kloza said, the average price is about $3.66 a gallon.
Carol Hill, a 25-year-old Los Angeles resident who works as a waitress at a Santa Monica restaurant, said she was unhappy paying $3.95 a gallon recently to fill her 10-year-old Honda Accord.
“The price of gasoline always goes up every year and never falls by as much,” Hill said. “There’s always some excuse someone has. All I know is that I’ll be very happy the day someone hands me the keys to an electric car.”
Fuel prices have been rising despite weak demand.
Energy Department statistics show that gasoline demand in the U.S. is running 157,000 barrels a day below 2010 levels. At the same time, gasoline stocks in the U.S. are down 16.3 million barrels below last year, at 208.8 million barrels, even though refinery outputs are high.
Rising inventories in periods of weak demand are one of the things that drive retail prices lower, but the refined fuels aren’t staying here; they are going overseas.
In just the last few months the U.S. has become a net exporter of refined fuels, according to Energy Department statistics. That’s a big change from as recently as May, when U.S. imports of refined fuels exceeded exports by 800,000 barrels a day. Most recently, exports have been running ahead of imports by 467,000 barrels a day, with much of the fuel going to Latin America and South America.
“We do know that there have been more sales overseas this year compared to previous years,” said Gregg Laskoski, a senior petroleum analyst for GasBuddy.com, a price-posting website. “That has been most evident in the Midwest. When we look at the BP Whiting refinery in Indiana, which is one of the largest in the country, you see the output is strong, yet we are still seeing a lot of high prices in the markets this refinery is serving.”
Laskoski added, “It’s troubling for consumers to try to reconcile the high price they see at the pump when the seemingly local refineries that served them in the past are now outsourcing more of their products overseas.”
What’s more, U.S. motorists aren’t benefiting from relatively stable domestic oil prices because of supply bottlenecks. This is most evident in states such as California, which doesn’t have access to pipelines that could bring it some of the nation’s relatively plentiful West Texas Intermediate crude.
There has been a huge spread this year between the U.S. benchmark and the more volatile European benchmark for commodities trading — Brent North Sea crude. Brent crude is traded on the ICE Futures Exchange in London, and it has been heavily influenced this year by the so-called Arab Spring, which has seen regime changes in Tunisia, Egypt and Libya and uprisings in Yemen and Syria.
West Texas crude for October delivery rose 95 cents to $88.19 a barrel Monday. Brent crude for October dropped 52 cents to $112.25 a barrel.
California imports about 48% of its oil from sources tied to the much higher price of Brent crude. Alaska oil as a resource for California is not only shrinking rapidly — down to about 14% of the state’s needs — it has also gotten much more expensive. It recently was trading at $24 a barrel higher than West Texas Intermediate.
The high cost of Brent crude is another reason that U.S. motorists won’t see much in the way of price relief in the coming months.
“We’re not going to see a big drop in gasoline prices,” said Phil Flynn, an analyst with PFGBest Research in Chicago. “We are probably at the low point for oil prices right now, and there is too much going on in the rest of the world, from higher demand and from reduced exports from places like Libya, for oil not to work its way back up in the coming weeks and months.”
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