Cheapest gasoline in years to get cheaper

Drivers across the U.S. enjoying the lowest pump prices for this time of year since 2010 will probably see further declines as refineries benefiting from the shale boom produce record amounts of fuel.
The average is $3.428 a gallon, down 6.2 percent since Memorial Day on May 26, AAA data show. That’s the largest decline from the start of the summer driving season since 2008. U.S. refineries operated at the highest-ever seasonal rates every week since July 4.
Processors are using domestic crude that costs less than foreign imports as horizontal drilling and hydraulic fracturing in shale formations increased output to the most since 1986. Gasoline will drop another 10 to 20 cents a gallon by the end of October as retailers switch to cheaper, winter-blend fuel, said Michael Green, a Washington-based spokesman for AAA, the largest U.S. motoring group.
“Refineries this summer were running at record-high levels due to the increase in domestic oil production,” Green said Sept. 4 by phone. “That has helped cushion U.S. consumers from many concerns overseas and helped to alleviate any price spikes this summer.”
Crude oil, which makes up about two-thirds the cost of gasoline at the pump, has fallen 14 percent since June 20.
Shale drilling has boosted U.S. production 62 percent in the past five years and restrictions on the export of most unprocessed crude increased supply to a record earlier this year.
Oil output will reach a 45-year high in 2015, the Energy Information Administration reported last week in its Short-Term Energy Outlook. Gasoline pump prices will average $3.41 a gallon next year, the agency estimated, down from $3.46 forecast in August.
While refinery production is at an all-time high, four-week average demand was 9.07 million barrels a day in the period ended Aug. 29, the lowest seasonal level in 12 years. It fell to 8.99 million the week ended Sept. 5. U.S. gasoline supplies at the end of summer are 1.7 percent above the average of the past three years.
“Demand going into the Labor Day holiday was disappointing,” Phil Flynn, a senior market analyst at Price Futures Group in Chicago, said Sept. 8 by phone. “This was going to be the year. And then it really kind of fell short.”
Prices typically fall as retailers switch from summer-blend to winter-blend gasoline in September. Over the past three years, costs at the pump dropped by an average of 28 cents a gallon from Sept. 1 to Oct. 31.
“Near term, retail prices could continue falling a few more cents because of the reduced cost of manufacturing,” said Trilby Lundberg, president of the Lundberg Survey Inc., which publishes retail gasoline prices. •

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