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How Low Will Gas Prices Go?

This is one of those predictions I would love to see come true.

NEW YORK (CNNMoney) -- The recent drop in prices at the pump could pick up steam, driving gasoline sharply lower in coming months.

"I'd say $2 to $2.50," said Tom Kloza, chief oil analyst at the Oil Price Information Service. "Once you get past Sept. 15, it's really a downhill game."

Kloza said so far the average cost of a gallon of gas peaked this year at $3.036 on Aug. 10 and has come down largely thanks to diminishing hurricane fears.

"There's just nothing happening in the tropics, and the market had priced in all sorts of calamities," he said.

The motorist organization AAA reported a nationwide average of $2.82 Tuesday, the lowest since April 20.

Online gasoline price survey site Gasbuddy.com shows Wednesday's national average at $2.80.

Another analyst pointed to a 60-cent drop in wholesale and spot prices the past few weeks, noting consumers should see a similar drop in retail prices in the coming few weeks as the decline works its way through the market.

The drop in wholesale and spot prices would translate to retail gasoline prices of around $2.50 to $2.60 a gallon, analysts said.

"The levels that were in place were never justified to begin with," said Mark Gilman, an analyst with The Benchmark Co. "This is a bit of a return to reality."

Gilman said retail gasoline prices of around $2 a gallon by Thanksgiving were certainly possible, although not likely.

He said crude prices would need to drop by about $20 a barrel to have that effect, and he just didn't see any major catalyst that would cause such a decline over the next three months.

Kloza said several circumstances are behind the recent gasoline price declines: the end of the summer driving season, which reduces consumer demand for gasoline, as well as the end of seasonal federal requirements on gas that make the cost of importing and refining it cheaper.

Update: I think high gas prices are one of the main reasons the President has not gotten credit for the wonderful economy. He didn't really get any credit for it before gas prices started to rise either, though. Ed Driscoll points out the likely reason.


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Comments (25)

Just in time for election d... (Below threshold)

Just in time for election day huh Lorie.

Mmmmmm, what's that you say Mr. Kloza? A republican big oil cabal?

Exactly - the republican oi... (Below threshold)
Lee:

Exactly - the republican oil pals will pull down the price before he election, the put the screws to the American public again afterwards.

Nah, Lee, if they really wa... (Below threshold)
James Cloninger:

Nah, Lee, if they really wanted to effect the prices before election, you take a page from Bill Clinton's book, and release oil from the Strategic Reserve several months before the election in 2000...
http://money.cnn.com/2000/09/21/economy/gore_oil/

You remember that, don't you? Oh, you conveniently forgot that little bit of trivia.

Yes, they'll pull down the ... (Below threshold)
RicardoVerde:

Yes, they'll pull down the prices this year..... uh, just like happens every year, just like during Pax Clintonia.

I suppose they never taught macroeconomics at some schools.

Don't count on gasoline pri... (Below threshold)
Corky Boyd:

Don't count on gasoline prices hitting $2.

There are too many bad guys who have vested intersest in high crude prices and are immune to market manipulation laws. Between Ahmadinejad, Putin and Chavez you will see all sorts of scare tactics and saber rattling if prices decline. You are seeing it now.

For all the cynics who think the administration is high price friendly, no politician in his right mind wants to see high gasoline prices, and no American can spike prices down unless he/she opens the spigots of the strategic reserves, a very short sighted solution. The President has avoided using the reserves and has done so only when there are serious short term supply problems (post Katrina and the recent Prudoe Bay/BP fiasco).

In fact he has been outspoken in his efforts to increase supply, mainly because of our vulnerability to another boycott.

unless he/she opens the ... (Below threshold)
James Cloninger:

unless he/she opens the spigots of the strategic reserves, a very short sighted solution. The President has avoided using the reserves and has done so only when there are serious short term supply problems (post Katrina and the recent Prudoe Bay/BP fiasco).

See my post above, with one correction...I said "several months before the election"...it was several WEEKS before the election!

Drill continental U.S. buil... (Below threshold)
jainphx:

Drill continental U.S. build refineries,build pipe lines,take away the sundrie blend concoctions forced by environmental wack jobs,and the price will be below 2$,with out a doubt.

Drill continental U.S. b... (Below threshold)
James Cloninger:

Drill continental U.S. build refineries,build pipe lines,take away the sundrie blend concoctions forced by environmental wack jobs,and the price will be below 2$,with out a doubt.

Preaching to the choir, here. It's like saying "If you are thirsty, pour yourself some water".

Being young in the world of... (Below threshold)
Kody:

Being young in the world of politics, I might have not so conventional ideas but this is my two cents. Why would we need a gas price analyst? In a way if this gas price analyst said "gas prices will rise to over 4 dollars a gallon"wouldn't that be manipulation of the public? Anyone without a conscious would blindly follow whatever the gas price analyst would say and expect his/her predictions.Is this because the human race has a constant need to know, even if it isn't true.

The industry analysts have ... (Below threshold)

The industry analysts have steadily maintained that the price of oil should be in the $35 - $45 range based on the supply and demand figures. Higher prices have been driven by a speculative "perfect storm" which began before we invaded Iraq. Problems with supplies and operations in oil-producing countries have kept the futures market high.

When the bubble bursts, it will all come down fast as the short sellers buy back contracts on the way down to cover their positions.

In Columbus, OH we're alrea... (Below threshold)
James:

In Columbus, OH we're already seeing cheaper gas. One station that is usually the most expensive was at $2.46 today, $0.03 cheaper than Tuesday. One of the cheaper stations was at $2.42, again $0.03 cheaper than Tuesday.

My parents in mid-Michigan said their gas was still up to $2.61.

It seems like gas prices have been dropping steadily the last two weeks from about $3. I have to wonder how much of this is from competition vs. cheaper gas from the distributor though.

Call me skeptical.... (Below threshold)
Baggi:

Call me skeptical.

I find this behavior very suspicious. My family and I have done a pretty good job over the last few months adjusting to the new prices. I'd love to see prices drop down to $2.00 a gallon, but a few years ago i'd be screaming at such a high price.

Now we are all celebrating that prices might drop to $2.50 a gallon.

But what happens if prices drop to $2.00 or $2.50 a gallon by October and then start heading back to $3.00?

Perception is everything in politics. If prices remained constant from now until election day it wouldn't hurt the Republicans. However, if prices drop and then rise again back to current levels, it will hurt the Republicans.

I think there is manipulation going on here, let's see what happens a month before the election.

As I said, i'm skeptical about this market and who's behind the price drop. Hopefully the price will drop and it will keep dropping, but what shall we say if the price drops and then returns to these levels right before the election?

"as well as the end of seas... (Below threshold)
kirktoe:

"as well as the end of seasonal federal requirements on gas that make the cost of importing and refining it cheaper."

That says it all in a nutshell doesn't it? People never take the time to realize that it's not just the oil companies that make a profit off gas prices. The government does too. In fact, they make more when you coinsider the taxes involved.

I blame Bush.... (Below threshold)
Les Nessman:

I blame Bush.

Jim is exactly right. Oil ... (Below threshold)
James Brewer:

Jim is exactly right. Oil and gas prices should have never been this high to begin with and it was caused by fund managers looking for a place to put idle cash. Now that the market forces have set in that are not going to sit around and take losses on their positions. In fact, CFTC data has shown that fund managers having been unloading their position for several months as the public has gotten more bullish on prices. This is a sure sign of a top and a bubble that is begining to burst.
That is what is really happening. Now for dems and Kos kiddies etc. What is happening is that oil companies senseing a dem takover and an end to their 'good times' have conspired with OPEC to lower the price of oil and gas...until after the election. On top of that, Ivy leagued educated weather forecasters predicted a lot of bad hurricanes, as well as Algore, and they can't be wrong, I mean they went to schools in the northeast. But where are the hurricanes you ask? Karl Rove, not having to worry about Plamegate any more, has pull out his weather machine (the one he used on NO last year) and stopped the hurricanes forming or has sheered the tops off of those that got past him with upper level winds.

Exactly - the republican... (Below threshold)
OregonMuse:

Exactly - the republican oil pals will pull down the price before he election, the put the screws to the American public again afterwards.

Yeah, that's right, Lee. The eeeeeeevil Karl Rove will pull a bunch of levers and twist a bunch of knobs on his Oil Price manipulation machine that he keeps stashed in his closet next to his Hurricane Generating machine (you know, the one all you deranged moonbats think he used to make Katrina so he could kill all those poor black people in New Orleans while leaving rich Republicans in Mississippi untouched) to flood the world with cheap oil on election day. Nobody can pull the wool over your eyes, Lee, nosiree.

What a f'n moron.

All this reserve..yet this ... (Below threshold)
Drew:

All this reserve..yet this summer when all America was driving around it was over $3 ...


We all know people with a small business..
It is the price of gas that in many cases has taken away their slim margin of profit.

Where politics enters in is the lack of serious hearings on this..the last one was a sham where
the Oil folks did not even have to testify under oath. Although Big oil and their splinter 527"s..Pac's etc...might give more to Republicans...they give to Both Parties..

It is up to us...especially during this campaign season..to press the candidates of our choice on this issue..

Too bad, sorry to dissent o... (Below threshold)
jack oneil:

Too bad, sorry to dissent on this one. I for one think higher prices on gas will help in the long run by forcing us to look at alternatives to oil and at the very least, look at drilling more in the US and building some new refineries.

No. The real reason he doe... (Below threshold)
Robert:

No. The real reason he doesn't get credit for a growing economy is that real wages for average earners is stagnant, while profits for businesses are up markedly.

Don't mind me. I'm a rocket scientist.

Uh, here in Kansas City, Mi... (Below threshold)
Hal Duston:

Uh, here in Kansas City, Missouri, regular unleaded gasoline is $2.55 today

In Columbus, OH we're al... (Below threshold)
James Cloninger:

In Columbus, OH we're already seeing cheaper gas. One station that is usually the most expensive was at $2.46 today

Let me guess, the United Dairy Farmers/Mobil stations? I saw it too. (I live in Pickerington)

Let me guess, the United... (Below threshold)
James:

Let me guess, the United Dairy Farmers/Mobil stations? I saw it too. (I live in Pickerington)

The more expensive ones were on Cleveland @ 161, I guess thats actually Westerville...i still don't understand the whole naming thing after being here for 8 months.

The cheap one was the Meijer on Hamilton Rd.

i tifton,ga its 2.39 at pil... (Below threshold)
lil bit:

i tifton,ga its 2.39 at pilot

in tifton,ga its 2.39 at pi... (Below threshold)
lil bit:

in tifton,ga its 2.39 at pilot

Here in pittsburg, kansas i... (Below threshold)
Tyler:

Here in pittsburg, kansas its arleady $1.99 and low in other towns around our area. I heard from the news that it could all drop below a $1.50.

WOW




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