A sudden drop in crude-oil prices means Americans are on track to pay much less for gasoline at the pump this summer—in some cases less than $2 a gallon. Gasoline prices are typically expected to rise this time of year due to higher demand and the requirement that gas stations use a more expensive blend of fuel that won’t ignite in hot weather. And a month ago, the average U.S. pump price hit a seven-month high at $2.90 a gallon, seemingly destined for $3. But prices in the futures market for crude oil, the main raw ingredient of gasoline, have unexpectedly plunged by 20% in the past six weeks to $54 a barrel—and refiners are passing those savings along to the consumer. The average U.S. price for a gallon of regular gas now stands at $2.77, which is 13 cents less than a month ago and 18 cents less than this date last year. A key reason for the price decline is that the U.S. is awash in both crude oil and processed fuels, now producing a record-high 12.4 million barrels a day of crude oil compared with 8.7 million three years ago, according to weekly Energy Information Administration estimates. Last week, the total amount of oil, gasoline, diesel and other refined products stored in tanks or pipelines in the U.S. rose by 22 million barrels. That was the biggest one-week increase in data going back nearly 30 years, and it put total oil and fuel in storage at a nearly two-year high of 1.3 billion barrels. Analysts said Midwest flooding may be partially to blame for the excessive inventories. Not all Americans are paying cheap gas prices. Californians are shelling out the most, paying an average $3.88 a gallon, partly due to higher fuel taxes and stricter environmental regulations. Hawaii, Nevada, Alaska, Washington and Oregon also have high gas prices. The South generally has the lowest fuel prices and Mississippi is currently the cheapest state, averaging just $2.33 a gallon. Jeanette Casselano, director of external communications for motorist federation AAA, said drivers should enjoy the overall lower gasoline prices while they last, noting that a potential spike higher in crude oil prices could quickly lift pump prices, too. Russia and the Organization of the Petroleum Exporting Countries, for example, are holding high-level talks later this month in which they may agree to extend until the end of the year a December agreement to cut production by 1.2 million barrels a day, she said. Do you expect gas prices to recover this summer? Let the author know your thoughts at dan.molinski@wsj.com. Emailed comments may be edited before publication in future newsletters, and please make sure to include your name and location. |