WASHINGTON, Dec. 10 (UPI) -- While there is a floor for U.S. gasoline prices, there are few signs pointing to an end to a new era of relief at the pump, price watchers said.
Motor club AAA reports a national average price for a gallon of regular unleaded gasoline Wednesday at $2.64, more than $1 off from the yearly peak in April. It was late September the last time the price at the pump increased and Michael Green, a spokesman for AAA, told UPI there's no end in sight for the declines.
"Gas prices typically reach a low this time of year, but there are no indications that prices will stop dropping anytime soon," he said. "As long as the crude oil market continues to search for a bottom, consumers will pay lower gas prices."
Gasoline prices typically fall after September, when U.S. refiners switch to a winter blend that's less expensive to manufacture.
Meanwhile, oil prices, which represent about 60 percent of the price at the pump, have shed about 30 percent of their value since June. That trend is in part behind the lower price for gasoline, though Green said demand is influenced somewhat by better fuel efficiency.
Low gasoline prices are viewed as a de facto stimulus for the U.S. economy. During the busy holiday season in November, consumers saved more than $160 million on fuel costs.
Green said this may start to influence consumer habits, which could in turn start to impact supply and demand mechanisms.
"There increasingly is the possibility that lower gas prices and a stronger U.S. economy could lead to increased petroleum demand next year," he said. "The longer that gas prices remain low, the better the odds that many people will change their driving or personal habits, which could fundamentally alter the demand equation."
Increased U.S. oil production, to the tune of 9 million barrels per day, means supplies outweigh demand in the current market. At some point, consumers may start driving more or consider buying less fuel-efficient vehicles.
But there is a floor to both crude oil and gasoline prices. Oil prices in particular may reach a point where it's no longer profitable to drill, especially in U.S. shale basins. That could influence production and put positive pressure on crude oil prices.
Tom Kloza, head of energy analysis at Oil Price Information Service, told UPI that, at least for gasoline, "the market is still plumbing the depths."
Based on 30 years of data, Kloza said there's always a market bottom, which usually falls somewhere between Oct. 6 and Feb. 24. After that, prices should start to rebound and move closer to $3 per gallon.
Analysis from the U.S. Energy Information Administration finds the retail price for a gallon of regular unleaded to average just below the $3 mark next year.
Kloza said the rebound will be brief, however. By May, global crude oil supplies should dwarf demand and, in June, members of the Organization of Petroleum Exporting Countries will again take a look at the global market situation.
Last month's decision by OPEC to keep production static put significant downward pressure on crude oil prices.
"An epic failure such as the one that occurred on Thanksgiving, would lead to another epic downturn where crude could trade for $35-$50 per barrels and U.S. retail prices of below $1.99 gal might be common," Kloza said.
