Gas sticker shock: $3 and falling

Prices drop to 2011 lows; state average $2.97

Arkansas Democrat-Gazette/MELISSA SUE GERRITS - 10/17/2014 - Gas prices are shown at a recent low at Kroger Grocery store on JFK Blvd in North Little Rock October 17, 2014.
Arkansas Democrat-Gazette/MELISSA SUE GERRITS - 10/17/2014 - Gas prices are shown at a recent low at Kroger Grocery store on JFK Blvd in North Little Rock October 17, 2014.

Gasoline prices in the United States have reached lows not seen since early 2011 as a tumbling oil market has pump prices headed below $3 a gallon, energy analysts said this week.

Crude prices, which recovered slightly Friday, have dropped off -- about $30 a barrel since June 25 -- on waning demand and reports of abundant supply.

With the national average for regular grade gasoline at $3.14 a gallon, the United States is in an "era of low gasoline prices," said Phil Flynn, an analyst with Price Futures Group in Chicago.

Gasoline prices in Arkansas already have dipped below the $3 mark, averaging $2.97 on Friday for a gallon of regular grade, according to AAA's Daily Fuel Gauge Report.

Barring a major disruption in oil supply or refinery production, retail gasoline could reach prices not seen since 2010, said Don Redman, a spokesman for AAA.

Arkansas gasoline prices per gallon will average between $2.80 and $2.90 and will influence consumer spending this month, said Tom Kloza, chief oil analyst for Gasbuddy.com, a price-tracking website. "It provides a little bit of a boost to restaurants, family dining and travel," he said. "We're looking at a little bit of an oil price dividend for consumers."

The recent drop in gasoline prices means an annual savings of $500 for an average U.S. household consuming about 1,000 gallons of fuel a year, according to data from the Federal Highway Administration and Energy Information Administration.

"That's like somebody putting dollars right in your pocket," David Hackett, the president of Stillwater Associates, an energy consultant in Irvine, Calif., told Bloomberg News.

"That sounds like Christmas presents, going out to dinner, being able to do something."

Gasoline for November delivery rose 2.2 cents Friday to close at $2.23 a gallon on the New York Mercantile Exchange.

Gasoline in storage in the United States fell 4 million barrels last week to 205.7 million barrels, according to a report from the Energy Information Administration. Oil stockpiles in the U.S. rose 8.9 million barrels to 370.6 million barrels during the week that ended Oct. 10, according to the report.

Oil prices rose slightly Friday but were still down 4 percent for the week.

West Texas Intermediate crude for November delivery gained 5 cents to close at $82.75 a barrel on the New York Mercantile Exchange. The November contract for Brent crude rose 34 cents to close at $86.16 a barrel on the ICE Futures Europe exchange in London.

Signs that the Organization of the Petroleum Exporting Countries will not cut production in order to lift prices and curtail global supply has weighed on the cost of crude as some worry about a glut in the oil market.

"We've seen the price of oil really sell off in the last few weeks," Flynn said. "There's a lots of speculation in the markets that the biggest producers in the cartel are banding together to break oil prices to slow down production in the U.S."

OPEC's biggest suppliers, including Saudi Arabia, are refraining from reducing production because any void created can be filled by other suppliers, he said.

"That has exasperated a situation where gasoline prices were already weak," Flynn said.

Economic weakness in Europe and Asia, which has softened energy demand, coupled with abundant supply is making the industry adjust to lower oil prices, said Michael Lynch, president of Strategic Energy and Economic Research Inc.

"I think in the short term we are going to see it bottom out somewhere between $70 and $80 because the Saudis don't want it to go too [much] lower," Flynn said. "I think what they want to do is try to discourage some of the more expansive investment [in U.S. shale areas]."

A Section on 10/18/2014

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