Gas prices fall ahead of summer driving
Average U.S. gasoline prices have tumbled for almost three weeks straight, driven by stubbornly low crude prices, high gasoline stockpiles and a surprising dip in demand.
Gasoline prices have tumbled for nearly three straight weeks in Houston at a time when they usually rise, as stockpiles remain high, crude prices stay low and fuel demand weakens.
Average pump prices in both Greater Houston and across the country fell about 4 cents a gallon over the past week, an unusually large dive for the spring, when prices usually begin their climb in advance of the peak summer driving season that traditionally begins Memorial Day weekend. Local prices averaged $2.21 cents a gallon Sunday, down from about $2.25 a week earlier; nationally, the average price fell to $2.34 a gallon, down from $2.38, according to GasBuddy.com, a website that tracks gas prices and refining activity.
“This is not a trend that we usually see in the spring,” said Patrick DeHaan, senior petroleum analyst for GasBuddy.com. “It’s usually a drop here, a drop there, and most of the other time it’s gas prices going up.”
Lowers gas prices are hanging around in part because of the glut of oil that became gasoline as refiners churned through large volumes of cheap crude and produced more gasoline than the market could absorb. In addition, the price of crude, the main component of gasoline, has sunk in recent weeks, falling below $45 a barrel, before recovering modestly. Oil settled in New York Monday at $46.43, up 21 cents.
But perhaps the most worrisome trend for refiners is sliding demand. U.S. consumption, compared to 2016, has fallen 16 consecutive weeks, dropping almost 3 percent the week ending April 28, the most recent available, according to the U.S. Department of Energy. Consumption jumped 6 percent during the same week of 2016 and 3 percent the previous year.
The energy industry has long worried about the declining U.S. demand as more Americans drive more fuel-efficient vehicles and electric cars. The trend has been profound enough that refining leaders, like Houston’s Phillips 66, are backing away
from gasoline. Company executives said last week that they see their future in petrochemicals, not crude refining.
“In 10 years, if we’re driving the same, we’re going to see less need for transportation fuel,” chief executive Greg Garland told reporters. “Given that as a backdrop, you don’t want to invest in adding capacity in a declining market.”
U.S. gasoline stockpiles, a measure of how much refiners are producing compared to how much U.S. drivers are using, have risen for three consecutive weeks. Since the middle of April, gasoline inventories have climbed by 3.6 million barrels, at a time when they usually begin to fall.
“There are some larger problems right now in the oil patch,” DeHaan said. “Perhaps markets are not coming back into balance between supply and demand.”
DeHaan said the consistent, surprisingly weak demand defies explanation. It might be that a wet winter in California and the rest of the West, which account for a large part of U.S. consumption, discouraged driving, he said. It might be that higher prices, after gasoline hit 12-year lows in the Midwest last summer, are keeping Midwesterners from road trips.
But it might also be a marker of changing habits that could mean future declines in demand, DeHaan said. “Americans,” he said, “have been moving slowly back to more fuel-efficient cars.”