Gas prices are poised to fall as Memorial Day approaches, a welcome change for drivers who have gotten used to seeing increases cut into their summer vacation money.
Experts who had been predicting a national average of more than $3 per gallon by Memorial Day now say prices have likely peaked just beneath that threshold. Rising supplies and concerns about the global economy have helped send wholesale gasoline prices plummeting by 22 cents a gallon since last week.
In the Seattle-Everett metro area, prices have held steady for the past week, according to AAA. It said the area’s average was $3.10 on Wednesday, compared to $2.40 a year ago.
“Gasoline supplies are about as good as they’ve ever been going into the summer driving season,” says oil analyst Phil Flynn of PFGBest in Chicago.
The decline in prices is starting to filter down to motorists, but it will take several weeks for the full effects to be reflected in pump prices, which average $2.90 nationwide.
By summer, the nationwide average could be below last summer’s peak of around $2.70 a gallon, says Tom Kloza of Oil Price Information Service. In July 2008, the retail price of regular gasoline peaked at $4.11.
Economists say the coming drop in energy costs will not have a significant impact on overall consumer spending or economic growth. But motorists will feel better having a little more money to save or spend on clothes, dinner or a summer vacation.
Chrystal Harned, who paid $3.01 a gallon the other day, says she will be more likely to take a road trip this summer if prices fall.
“It’s good to go see people and get out of the town and spread your wings a little bit,” says the 36-year-old waitress and bartender, who lives just outside Rochester, N.Y. She says business is picking up these days, but “you don’t want to put it all in the gas tank.”
From their peaks on May 3, oil prices have declined by 13 percent to $75.65 a barrel. Wholesale gasoline prices have declined by 9 percent to $2.21 a gallon.
Analysts were forecasting a nationwide retail average well above $3 a gallon just a few months ago. So what changed?
Supplies of gasoline have risen steadily. As of Friday, the U.S. had 222 million barrels of gasoline in storage — about 5 percent more than a year ago. Output from refineries has been growing at a faster pace than demand.
Political unrest in oil-producing nations has been muted. This is a wild card that could change quickly. But lately, violence in Nigeria and tensions in the Middle East have been relatively minor, traders say.
The massive oil spill in the Gulf of Mexico has had no impact on fuel prices because it’s had only minimal impact on petroleum production, analysts say.
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