U.S. drivers hitting the road for the holiday weekend will save some extra cash at the pump, the Energy Information Administration reports current gasoline prices are the lowest since 2004. Average prices on August 31 were $2.51 per gallon – $0.95 lower than one year ago. The Gulf Coast is currently enjoying average prices below $2.20, while California drivers are paying more than $3.30 per gallon due to tight supply and recent unplanned refinery outages.
Are We Heading Lower?
Summer driving season is winding down, but Americans made their mark on the auto industry in its busiest time of the year. A record amount of miles were logged in the first six months of 2015 and auto sales are near all-time highs. Despite the high demand and activity to date, there is still excess supply on the market that will carry over into the winter season. The EIA explains, “As fall approaches and U.S. driving levels are lower, reduced gasoline demand, shifts to less costly winter specifications for gasoline, and reduced crude oil purchases by refineries undergoing seasonal maintenance have the potential to put downward pressure on crude oil and gasoline prices.”
The forecast is reflected in the EIA’s Short-Term Energy Outlook for August 2015. The Administration expects full-year 2015 prices to average $2.41/gallon, while costs will decline to $2.11 in Q4’15. Refineries continue to run at record highs and are benefiting from margins of the West Texas Intermediate/Brent spread. Consumption is expected to remain steady in 2016.
The Export Ban and Its Effects on Gas Prices
Earlier this week, the EIA published a report detailing the repercussions of lifting the maligned crude oil export ban. The report found that, since gasoline prices are tied to the Brent spot rather than West Texas Intermediate, lifting the ban would most likely shrink refiner margins and lead to even cheaper prices at the pump.