Happy New Year — Gas still heading downward

2016 price may drop to $1.59, then rebound

If you think gasoline prices falling below $2 a gallon nationwide last week provided an early Christmas present, then get ready for a Happy New Year, too.

At least one analyst predicts that prices at the pump are going down even further after the last bottle of champagne is uncorked.

Tom Kloza, chief oil analyst at the Oil Price Information Service, said the national average for gas could drop to between $1.79 and $1.99 a gallon after Jan. 1. He predicted the average cost in Texas could go as low as $1.59 a gallon in early 2016.

“In the next 40 days — maybe the next 10 — we’ll find a bottom nationwide,” Kloza said. “It’s an easy call that 2016 will be a cheap year across the fuel spectrum.”

The AAA Daily Fuel Gauge Report said last Monday that the price for gasoline dropped to $1.99, the first time the average had been below $2 nationwide since 2009. (By Christmas Eve the price had climbed a penny to $2.) More than twothirds of the nation’s gas stations were selling fuel for less than that price in 47 states, with $1.89 being the most common price, AAA said.

In Texas, the average price for gasoline was $1.79 a gallon on Tuesday, or about 37 cents less than a year ago, AAA Texas reported.

Prices at the pump are dropping because a worldwide oversupply in crude oil has caused the cost of a barrel of oil to drop to about $35. Mild winter temperatures in the Northeast and Midwest have also cut the demand for fuel oil needed for heat and electricity.

In addition, gas prices historically drop through the early winter months because people drive less and use less fuel.

But Kloza — who predicted as early as August that gas prices would slip to $2 or less by Thanksgiving, Christmas at the latest — thinks prices will slide even more before bouncing back up in 2016 to a high of $2.50 to $2.60 a gallon.

“People will complain, but it’s not going to be one of those painfully expensive years,” he said.

(Kloza has a pretty good track record. His firm predicted the average price of gasoline would be $2.34 to $2.44 for 2015. It looks like the average will land at $2.40.)

Kloza doesn’t think crude oil prices will necessarily see the same kind of drop, adding that at some point next year the price of gasoline and a barrel of crude will “decouple.”

“I’m not a believer in sub-$30 crude,” he said.

Gas prices also start to climb in the spring and summer, when there is more demand for fuel and the nation’s refineries switch to a blend of gasoline that burns cleaner to meet federal emission standards. This process begins in February and ends in June, but refineries must produce the summer blend no later than April and retailers must start selling it May 1.

In the recent AAA Daily Fuel Gauge Report, the lowest 1 percent of U.S. stations were selling gas for an average of $1.59 per gallon, and more than 13,000 stations were selling gas for less than $1.75 per gallon.

The states with the cheapest averages included Missouri at $1.77; Oklahoma, $1.78 and South Carolina, $1.78. Kansas City, Mo., had the cheapest metro average at $1.68 per gallon.

California drivers were paying some of the highest prices at $2.75 on Wednesday, with Kloza predicting that they would pay an average of $3 a gallon over the winter.