Retail gasoline prices are at historic lows because of favorable market conditions, but may be too low for profits, analysis finds. File Photo by Jim Ruymen/UPI | License Photo
WASHINGTON, July 12 (UPI) -- Gas prices in the United States are at their lowest point in 12 years because of market conditions, though some areas are ripe for a spike, analyses find.
Motor club AAA reports a national average retail price for a gallon of regular unleaded gasoline at $2.23, about 2 percent lower than last week for the lowest point for this date in 12 years. According to AAA, about a quarter of retail gasoline stations are posting prices below the $2 mark.
AAA said much of the slide in retail gasoline prices is a reflection of movements for crude oil prices, which are holding in the mid-$40 range after moving briefly above the $50 mark earlier this year.
"The price of oil currently reflects slightly more than half the price of gasoline at the pump, so lower oil prices are expected to result in lower retail gas prices for drivers," the motor club explained. "Additionally, the most recent Department of Energy report cited domestic gasoline production as just 100,000 barrels per day short of the all-time record, lending further momentum to falling prices."
The price at the pump is about 20 percent less than this date in 2015, though AAA said there are a number of factors that could lead to a spike in retail prices. If oil prices stay lower, some producers may cut back to save money, and squeeze supplies. Trouble overseas, meanwhile, could lead to supply shortages from some exporters that feed the U.S. market.
Regionally, AAA said drivers on the West Coast are paying the most for gas currently, but also post the largest year-on-year declines. Drivers in the Great Lakes region, meanwhile, are seeing the largest declines in gas prices over the month, with retail prices in Ohio off more than 20 percent.
A separate market snapshot from GasBuddy.com finds Great Lakes retailers are selling gas at a loss because of competition. "Motorists in Michigan, Indiana, Ohio, Missouri, Illinois and Kentucky may see average prices rise 10-20 cents a gallon thanks to the price cycling behavior in those areas that is behind the likely price hike soon," an emailed report read.
Nevertheless, both analyses said retail prices should remain at historic lows for the medium term because of favorable market conditions. A surplus of oil on the market helped push oil prices below $100 per barrel in 2014 and a report from S&P Global Platts found oil production in June from members of the Organization of Petroleum Exporting Countries increased more than 32.5 million barrels per day.