Just in time for the holidays: Lower gas prices

Prices at the pump nationally have fallen substantially in recent weeks, and are nearly back to where they ended 2011. Drivers are saving about $5.70 since mid-September on a 10-gallon fill-up.

By Charley Blaine Dec 13, 2012 3:31PM
© Purestock/Purestock/Getty ImagesHappy holidays from a gasoline station near you!

In case you haven't noticed, you're paying less to fill up your car at the gas pump -- nearly 15% less since September and more than 16% less than what you might have paid when prices peaked in early April.

In fact, the national average retail price of gasoline is very nearly back to the price at the end of 2011, according to AAA's Daily Fuel Gauge Report.

The retail price was $3.301 a gallon nationally Thursday, down from $3.315 on Wednesday.

The price was just above -- 0.76% above to be exact -- $3.276 a gallon, the average price on Dec. 31, 2011.

The bad news in the report is that gasoline nationally has averaged $3.62 over the 348 days so far in 2012; that's the highest ever. But the average price is down about 64 cents from the high price of the year, $3.936, set on April 5 and April 6. It's down 57 cents since Sept. 14.
What gives? A number of factors, says Fred Rozell, director of retailing for the Oil Price Information Service, the company that collects the data for AAA:
  • Seasonality. Gasoline prices rise starting in the early winter as refiners start to build up supplies for the summer. And they typically fall starting in late summer or early fall into the winter bottom.
  • Fuel efficient cars. Slowly but surely, the American auto fleet is getting younger and is more efficient. That's cut into demand at the gas pump.
  • Hurricane Sandy. That's crimped gasoline demand in the middle Atlantic states as residents clean up and rebuild from the storm that crippled New Jersey, New York City and Long Island.
  • A soft economy. Consumers are wary about doing a lot of traveling because they worry about a weakening business environment.
A last factor that we should mention is that a fear of war between Israel and Iran has faded. At least for now.

The gasoline price runup that normally starts in early winter actually began in the fall of 2011 and continued into February as the talk about Israel taking preemptive action against Iran's nuclear installations escalated.

Gasoline demand for 2012 may be the lowest since 2001, Rozell says. The peak was 2007 when the economy appeared to be soaring. 

About 6% of gas stations are selling regular unleaded gas at under $3 a gallon, OPIS data show. Missouri has the cheapest gasoline, followed by Oklahoma and Texas. Hawaii is the only state where gasoline prices are still above $4 a gallon.

Gas prices are, of course, tied to crude oil prices.

Light, sweet crude oil (-CL) in New York peaked at $109.77 on Feb. 24. It was at about $86 a barrel Thursday.

Brent crude
, the benchmark North Sea crude, peaked at $126.20 a barrel on March 1. It's at about $108 a barrel now. Brent reflects conditions in global oil markets better than light sweet crude.

For 2013, Rozell expects a similar pattern but doesn't see retail prices reaching their 2012 peaks.

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Tags: Economy
Dec 13, 2012 6:30PM

I'll admit this is a first!  Low gas prices at the Holidays!!!  I just don't believe it there must be a catch somewhere!!!

Dec 13, 2012 6:21PM
This is good news...for now.  Enjoy it while you can, because I am sure that OPEC and the current administration is looking for ways to drive the price back up.  The last thing OPEC wants is cheap gas for the west unless they say so.  This is the last thing Obama wants because if it costs less to drive standard gasoline fueled cars, where will the incentive be to buy hybrids or electric.  This is a threat to his avowed energy and environmental goals.  Trust me...he will torpedo this at some point down the road....probably sooner than later.
Dec 13, 2012 4:18PM
Chicken or egg? Is gas cost down because of the economy or is the economy down because of gas prices?
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