Gasoline Prices May Sink this summer to their Lowest Level in Six Years

A U.S. federal agency forecasts that the current crude oil oversupply will drag down prices this summer to their lowest seasonal level in six years. On a smaller scale, California, which experienced a surge in gas prices to a dollar above the national average, is expected to follow a similar trend.

Allison Mac from GasBuddy.com, a website that tracks in real-time gas prices across the states and reports them to consumers, recently said that gasoline prices would continue to slip, unless a natural disaster or major supply problem occurs.

“We may have already peaked in Los Angeles. We’re on pace to have one of the lowest-priced summer driving seasons in a while,”

Ms. Mac also said.

On Tuesday, the U.S. Energy Department reported that from April through September, which is the busiest driving period, gasoline will settle at a national average of $2.45 per gallon at gas stations.

According to the energy agency, the price is the lowest in six years and nearly a third less than the national price per gallon recorded over the same period a year earlier.

Additionally, the agency expects U.S. drivers to use over 1.5 percent more gasoline this summer due to low unemployment and improving income prospects. Yet the amount of money they will have to take out of their pockets for fuel is expected to be at the lowest in eleven years.

Analysts claim that lower fuel prices will encourage people that plan to purchase a new car to go for a less-fuel-efficient model such as F-150 trucks.

The federal agency explained that low gas prices are the result of a demand that cannot keep up the pace of the supply. In 2014, the U.S. was ranked as the top producer of crude in the world.

Also, the Energy Department forecasts that Brent crude oil index will sink 46 percent this summer, i.e. from $107 per barrel last summer to $50 per barrel in the summer of 2015. By next year, prices will rise but only symbolically.

According to GasBuddy, gas prices had been on a falling trend for months after the crude oil overproduction crisis last summer, but climbed slightly earlier this year to fall again last month. As of Tuesday, the average price for a gallon of gas was $2.38, which is nearly eight cents cheaper than a month earlier and $1.20 less expensive than the same day in 2014.

However, the federal agency predicted that gas prices can go even lower if oil restrictions against Iran were to be soon lifted. Iran already has 30 million barrels in stock that it is ready to sell, and can easily resume production.

Additionally, crude imports and domestic production could also further sink prices due to oversupply.

California, however, is an exception. Two major events that occurred in February triggered an unprecedented gas price hike – a refinery worker strike, which stopped production in many refineries across the state, and an explosion at Exxon Mobil Corp’s Torrance refinery.

These two events boosted gas prices in the golden state to a dollar per gallon higher than the national average in February.

Image Source: Virginia VW Blog