Never Mind $4 a Gallon, Analysts Say

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Never Mind $4 a Gallon, Analysts Say

Gasoline prices have taken a definite dip in past weeks and it is going to get even steeper as the winter season approaches, with some industry analysts saying that prices could drop to around $2 a gallon by the end of fall.

"The only place they have to go is down," Fred Rozell, a gasoline analyst at the Oil Price Information Service told USA Today. "We'll be closer to $2 than $3 come Thanksgiving."

Rozell confirms the opinion of Gulf Oil's CEO, Joe Petrowski, who last week told CSNews Online that "Gasoline prices could go up, or prices could go down, but I think there is more chance they will go down."

The current drop to a national average of $2.84 on Tuesday -- the lowest recorded price since April 20 -- from this year's high of $3.03 recorded on August 10, is due to a number of factors including the end of the summer driving season.

Other factors include a drop in demand for gasoline. For the first eight months of 2006, gasoline use has only increased 1 percent, lower than the typical growth of 1.5 or 2 percent, according to Michael Morris, analyst at the U.S. Energy Information Administration. "Wholesalers are trying to get rid of product. The growth in demand for gasoline has really tapered off," he told USA Today.

Another factor that is helping the decline in price is the gasoline traders' exit from the market, as they believe that prices are too high to become stable and as the threat of hurricanes are diminished, according to Oil Price Information Service senior analyst Tom Kloza.

Prices for crude oil dropped 90 cents at the close of New York trading Tuesday, at $69.71 a barrel, the lowest price since May 4.

The long term gas price decline is good news for the economy and retailers, reported USA Today. Lower prices "may act like a tax cut" and stimulate spending, Richard DeKaser, chief economist at National City told the newspaper. He estimates that consumer spending growth was cut by 1 percent due to higher energy prices in the first six months of 2006.

But the dip might not last past the holiday season. Rozell told the paper that prices will likely head upwards come spring of 2007.