Fuel Decline Continues

By Brian Milne, Refined Fuels Editor, DTN Energy

For weeks now, retail gasoline prices have tumbled alongside plummeting crude costs as the current economic blight cuts industrial and commercial demand and triggers conservation efforts by Americans not seen since 1980.

The double digit weekly decline rate continued ahead of the Thanksgiving holiday, with the Energy Information Administration (EIA) reporting the U.S. average price for regular grade gasoline tumbled 18 cents to $1.892 a gallon as of Nov. 24, which is $1.205 below the average during the same week in 2007.

The question is however, how much more will pump prices decline?

View DTN’s Weekly and Historical Gas Prices

Wholesale gasoline prices in the vast majority of major metropolitan markets moved higher during the final week of November, climbing as buyers looked to ensure that markets they supply had adequate inventory, while locking in prices ahead of a potential increase this week following an emergency meeting by the Organization of Petroleum Exporting Countries (OPEC).

OPEC met in Cairo on Nov. 29, but failed to reach a consensus on what action to take to slow the rapid decline in crude prices, deferring such a decision until their meeting in Algeria on Dec. 17. As a result, the wholesale markets are reacting to OPEC’s non-decision by selling off, with gasoline values down to start December.

That creates a mixed bag for retail gasoline prices, but the bias will remain pointed down since there remains savings from the wholesale markets that have not yet been fully passed through to consumers.

After that, much will depend on the performance in wholesale markets over the next couple of weeks. Refiners, generally speaking, have been losing money when turning crude into gasoline, so are anxious to limit supply to support prices.

The bottom line, however, is the rapid decline in retail gasoline prices is nearing an end absent more dismal news on the economy. One should expect the slide in their local pump prices to slow in early December, while others might note their retail gasoline costs are holding unchanged to inching higher.

About the Author
Brian L. Milne is the Refined Fuels Editor for DTN—a leading business-to-business provider of real-time commodity information services. Milne has been focused on the energy industry for nearly 14 years as an analyst, journalist and editor. He can be reached at brian.milne@dtn.com.

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