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Lower gas prices might not last

Demand and a switch to a summer blend of gas likely means the price at the pump will continue to rise over the next few months.

By Daniel J. Graeber
Retail gas prices inched lower for most of February, but don't expect the trend to last. File photo by Monika Graff/UPI
Retail gas prices inched lower for most of February, but don't expect the trend to last. File photo by Monika Graff/UPI | License Photo

Feb. 27 (UPI) -- Average commuters in the United States saw relief at the pump continue through much of February, but lower retail gas prices might not last, analysis finds.

Motor club AAA reports a national average retail price of $2.52 for a gallon of regular unleaded gasoline on Tuesday, a slight decline from the previous day for its lowest mark so far this month. The price at the pump is still just 6 cents per gallon lower than month ago and gas prices are about 25 cents, 10 percent, higher than this time last year.

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Gasoline prices usually follow crude oil prices, which dropped about 1 percent since the start of February. Oil prices, however, are 5 percent below their peak for the year and some of that decline is showing up at the gas pump.

Demand, meanwhile, is on the decline somewhat because harsh and winter weather is keeping some motorists at home. According to AAA, however, the trend isn't expected to last with spring right around the corner.

By region, the West Coast market is the most expensive in the country and California tops the list with a state average price at $3.34 per gallon. The region as a whole could see gas prices move higher as gasoline inventories decline, though they're still inflated compared with this time last year.

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The Great Lakes region, meanwhile, is the most volatile with some states like Michigan posting a 5 cent increase in the price for gas, while Indiana marked a 10 cent per gallon drop. Gasoline inventories there increased, but are below the level from the same time last year.

Moving into spring, refineries start shifting gears to make a summer blend of gasoline, which is more expensive to produce because of stricter fuel regulations. That, coupled with demand strains, means higher gas prices are likely.

U.S. market dynamics, meanwhile, are influencing the price of oil. Production is setting records, but so too are exports and global demand. Traders watch the balance between supply and demand closely as a glut over the last few years -- which is disappearing -- pushed crude oil prices, along with retail gasoline prices, to historic lows.

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