AAA says abundant stocks, elevated production, and the lack of major refinery problems is depressing crude prices. At the same time, it says that gasoline prices still don't fully reflect the low cost of a barrel of West Texas Intermediate crude due to high demand. The gap between diesel and gasoline prices is down to seven cents, the smallest delta seen since July 2009. Those factors help explain why in May Americans set a new monthly record for the number of miles driven, putting 275.1 billion miles on our roads.
Assuming the situation remains the same in August, AAA says prices could go down another 15 cents, and in September it might go down even further as driven miles decrease and certain parts of the country switch to cheaper winter fuel blends. By the end of the year, "if everything keeps running smoothly," the price might be as low as $2 per gallon.
If you live in California, Alaska, Hawaii, Nevada, or Washington state, however, none of this applies to you. Those are the five most expensive places to buy gasoline, and at the time of writing all around Los Angeles it's most common to see every grade of gas above $4. The press release below has more details.
AAA Monthly Gas Price Report: July 31, 2015
Average U.S. Gas Prices Falling at the Fastest Rate Since January
· Gas prices are falling at the fastest rate since January due to cheaper crude oil costs and the resolution of some refinery issues. The national average price of gas has dropped for 16 days in row for a total of 11 cents per gallon. Today's national average price of gas is $2.66 per gallon, which is the lowest average for this time of year since 2009.
· It feels good to see gas prices drop during the middle of the busy summer driving season. Millions of people are hitting the roads right now and these gas savings should make their trips more affordable.
· Gas prices averaged $2.75 per gallon in July, which was the lowest average for the month since 2010. Today's average gas prices are about 85 cents per gallon less than a year ago. The national average has dropped about 14 cents per gallon since hitting a 2015 high of $2.80 on June 15.
· Oil prices dropped sharply in July on oversupply concerns for the second year in a row. The cost of West Texas Intermediate crude oil closed at a high of $61.43 per barrel in late June and has since dropped below $48 per barrel. Domestic oil supplies are about 25 percent more abundant than a year ago, while domestic oil production remains about 12 percent higher than last year, according to the Energy Information Administration (EIA). Oil prices were last this low in March, when the national average price of gas was about 30 cents per gallon cheaper than today.
· Strong fuel demand and refinery problems have kept gas prices higher than would otherwise be expected based on the cost of crude oil. Gasoline demand in July is up about six percent compared to a year ago, based on the latest four-week averages by the EIA. Strong gasoline demand can lead to tight supplies, especially if refineries are experiencing problems.
· Lower gas prices and a growing economy have helped motivate people to drive more this year. Americans drove 275.1 billion miles in May, which was the highest monthly total on record, according to the most recent report by the Federal Highway Administration. It is likely that driving has continued to increase this summer as Americans take long road trips.
· This is the second year in a row that gas prices dropped in July. Last year, average prices dropped 16 cents per gallon during the month before eventually plummeting $1.65 per gallon though January.
· The average price of diesel is only seven cents per gallon more than gasoline today. The difference between gasoline and diesel reached its most narrow point since 2009 in July. In January, the average price of diesel was 90 cents more expensive per gallon than gasoline. Gasoline and diesel prices are generally closest in the summer, while strong gasoline demand and refinery problems have kept gas prices higher than would otherwise be expected based on recent crude oil costs.
Average U.S. Gas Prices to Possibly Drop Another 15 Cents in August
· Gas prices should continue dropping to catch up with the recent decline in the cost of crude oil. All things being equal, a $12 decline in crude oil costs could reduce gas prices by as much as 29 cents per gallon. Given that prices have already dropped about 14 cents per gallon since reaching a 2015 high in June, drivers could see prices drop another 15 cents per gallon in the near term if oil remains stable and refineries operate at current production levels. Gas prices could drop even further if oil continues to fall and gasoline supplies grow larger this month.
· The recent price declines are hopefully just a precursor of much bigger savings to come at the pump. We could see many parts of the country make another run towards $2 per gallon by the end of the year if everything keeps running smoothly.
· Gas prices could drop more dramatically after Labor Day as people take fewer road trips and use less gasoline, which could lead to an even larger glut in petroleum supplies. In addition, stations in many parts of the country can switch over to less expensive winter-blend gasoline on September 15. The Southeastern and Central United States are the two regions most likely to see a large number of gas stations offering prices around $2 per gallon this winter.
· There are a number of factors that could keep gas prices from falling as expected, such as major refinery disruptions, higher oil costs, a major hurricane or conflict overseas. In addition, all parts of the country may not see prices drop as quickly. For example, refinery problems continue on the West Coast, which raises the possibility of price increases for that region if supplies grow tight.
Average Gas Prices in California are $1.50 more Expensive than in South Carolina
· California has the most expensive gas prices in the country with a statewide average of $3.79 per gallon. California's average is about $1.50 more expensive than South Carolina's average, which is $2.29 per gallon and the nation's least expensive market for retail gasoline.
· The five most expensive state averages include: California ($3.79), Alaska ($3.48), Hawaii ($3.29), Nevada ($3.25) and Washington ($3.18). The states with the lowest average gas prices include South Carolina ($2.29), Alabama ($2.29), Mississippi ($2.33), Ohio ($2.36) and Indiana ($2.37).
· Gas prices remain relatively high across the Western United States, due to ongoing refinery problems and strong demand. California, which has the largest concentration of drivers in the region, has experienced a number of refinery issues and supply challenges.
· A handful of U.S. stations are once again selling gas for less than $2 per gallon. By comparison, about 11 percent of stations are selling gas for more than $3 per gallon today.
· The most common price in the country is $2.499 per gallon, which compares to $3.399 per gallon a year ago.
Motorists can find current gas prices along their route with the free AAA Mobile app for iPhone, iPad and Android. The app can also be used to map a route, find discounts, book a hotel and access AAA roadside assistance. Learn more at AAA.com/mobile.
AAA updates fuel price averages daily at www.FuelGaugeReport.AAA.com. Every day up to 120,000 stations are surveyed based on credit card swipes and direct feeds in cooperation with the Oil Price Information Service (OPIS) and Wright Express for unmatched statistical reliability. All average retail prices in this report are for a gallon of regular, unleaded gasoline. For more information, contact Michael Green at 202-942-2082, firstname.lastname@example.org.