U.S. gasoline down 43 cents since April

LITTLE ROCK — Concerns over the fragile global economy have triggered a 17-cent drop in gasoline prices in Arkansas in the past month and speculation by some analysts that national average prices could tumble below $3 a gallon this summer for regular grade fuel.

International factors continue to influence gas prices, said Don Redman, a spokesman for auto club AAA. Earlier this year, worries about tensions with Iran drove prices up, and now worries over Europe and the world economy have driven prices down, he said.

“It is just an example of how volatile the market is,” Redman said. “The economy coming out globally is not so good, so we are seeing prices retreating.”

At this time last month, the average U.S. price of regular gasoline was $3.68 a gallon, and for Arkansas it was $3.39, he said. On Friday, the U.S. average was $3.45 and in Arkansas, $3.22, according to credit-card sales tracked by AAA.

In April, national fuel prices were projected to reach at least $4 a gallon during the summer for regular. Instead, prices have dropped 43 cents in three months. At its peak in April, the national average was $3.88, Redman said.

Many analysts have attributed the downturn in gasoline prices to a weak global economy, especially the problems facing European banks and governments. There’s been a sharp decline in the price of crude oil because demand has plummeted.

“There is a slowdown in the European economy, and China is slower than the market would like, this means they will take less crude oil and commodities,” said Bob Tebbutt, vice president of risk management at the U.S. division of the Peregrine Financial Group Canada Inc.

On Friday, the benchmark crude oil averaged about $78 a barrel in New York Mercantile Exchange trading, and wholesale gasoline fell to $2.73 a gallon.

In April, when prices were the highest so far this year, crude oil averaged about $105 a barrel in New York trading, he said. A barrel is 42 gallons.

Gasoline prices are primarily dependent on the price of crude oil, although refinery costs and retail competition also play roles.

As the demand for crude oil continues to fall, the supply continues to rise.

James Williams, an energy analyst and owner of the consulting firm WTRG Economics near Russellville, said that earlier this year, matters related to Iran played a big factor in keeping gasoline prices up. But Saudi Arabia has been able to supplement the loss of Iranian oil on the market, pushing prices down, he said.

“In the developed countries, gas and diesel consumption is down,” he said. “So consumption is lower, and that puts pressure on prices.”

Williams said that every time crude oil falls by $10, the price of regular gasoline drops by about 25 cents.

The nation’s slow economic growth coupled with high gas prices earlier this year have also cut into the demand of gasoline, he said.

“There has been minimal recovery since the recession and the economy hasn’t followed the normal path after a recession, which is strong growth, and we haven’t gotten up to normal growth,” Williams said. “People are concerned about extra expenses so they are vacationing close to home or not at all.”

He said the low prices at the pump are not necessarily a good thing if they signify a soft economy.

“Good news: Gas prices are going down. Bad news: You might not have a job and won’t have to buy gasoline, anyway,” Williams said.

In Arkansas, prices for regular gas already have fallen to $2.97 in some areas, according to gasbuddy.com, a website that allows visitors to post gasoline prices they see in their areas.

“Looking at spot market prices, yes, I think we have room to fall and potential to see at or slightly below $3 a gallon,” said Redman, the spokesman with AAA, referring to the national average price for regular grade. “But everything can change.”