Michael Johnson of Bay City fills up for $3.32 a gallon at a Meijer gas station on Eight Mile in Detroit on Wednesday. (Michael Martinez / The Detroit News)
Gasoline pump prices in the U.S. are poised to drop to the lowest since February 2011 by New Year’s Eve as supplies increase more than demand, providing a lift for consumers in an economy struggling to recover from the deepest recession since the 1930s.
Retail prices will probably sink to an average of $3.15 a gallon by Dec. 31 from $3.339, according to Michael Green, a spokesman in Washington for AAA, the nation’s largest motoring organization. The highest seasonal inventories in three years are set to rise as plants return from scheduled maintenance. Refining capacity in the fourth quarter will be 410,000 barrels a day higher than last year, while demand climbs 10,000 barrels, the Energy Information Administration estimated Oct. 8.
U.S. refiners are making the most gasoline ever for this time of year, having expanded to take advantage of ample domestic and Canadian crude. U.S. oil production grew in September to the highest level since May 1989 as advances in drilling techniques boosted output from shale formations. The U.S. met 87 percent of its own energy needs in the first six months of 2013, on pace to be the highest annual rate since 1986.
“We’re in a longer-term downtrend with retail gasoline prices because of reduced demand, increasing U.S. production of oil as well as increased refining capacity for gasoline,” said Phil Flynn, senior market analyst at Price Futures Group in Chicago.
Mirroring the national trend, Michigan gas prices have fallen 15 cents over the past month to an average of $3.42 a gallon on Tuesday, AAA Michigan said.
Some Michiganians, such as Michael Johnson, 41, are feeling a sense of relief.
The Bay City resident was filling up Tuesday afternoon at a Meijer gas station on Eight Mile in Detroit, where the price was $3.32 a gallon. “The upward trend (last summer) led me to believe gas would be $5 a gallon by now,” he said.
Retail prices have fallen 25.5 cents since the end of August, as the 2013 Atlantic hurricane season was shaping up to be the first in almost two decades without a major storm disrupting Gulf Coast production. The season runs from June 1 to Nov. 30.
Gasoline futures on the New York Mercantile Exchange have dropped 15 percent since August to $2.578 a gallon. West Texas Intermediate crude tumbled 10 percent in the same period to $96.40 a barrel.
“There’s a surplus of gasoline,” Dominick Chirichella, senior partner at the Energy Management Institute in New York, said by phone. “Refinery runs are going to go up when the maintenance season ends and we’re going to produce more gasoline than we need.”
Retail prices are 31.9 cents below a year ago, data from Heathrow, Fla.-based AAA show. The last time the national average dipped below $3 a gallon was Dec. 21, 2010, according to AAA.
Some filling stations in 23 states are already selling gas for below $3, AAA’s Green said. The cost for drivers in as many as 10 U.S. states may average less than $3 by year’s end, according to Green. The average price last Dec. 31 was $3.292, after falling 37.3 cents between Oct. 21 and the end of the year.
The lowest average is in Missouri, where drivers are paying $3.033 a gallon, AAA’s website shows. Within that state, Kansas City drivers paid $2.984 a gallon and St. Joseph’s average was $2.966. California had the highest prices in the lower 48 states at $3.77 a gallon. Last summer, prices in Michigan surged to around $4 a gallon, due to refinery shutdowns and tropical storms crippling production.
Those high pump prices forced 57-year-old Duane Bialk to look for a fuel-efficient car so he could drive his self-described gas-guzzling Ford F-150 less.
He was filling the truck Tuesday afternoon at a BP in Royal Oak for $3.49 a gallon.
“It’s better to see this than the way it has been in the past,” he said. “Last year when we went to Florida for Christmas I was paying more than $4 a gallon.”
A few blocks west, Joseph Vittner, 54, was parked at a Marathon station on 11 Mile.
The Hazel Park resident uses the more expensive midgrade blend to fill up his 10-year-old Dodge Ram, along with the equipment for his lawn care business. He hopes prices continue to fall, but said understands it’s out of his control.
“If you need it, there ain’t a whole lot you can do,” he said.