Why It Looks Like Gas Prices Have Further To Fall

What’s bad news for the energy industry could be (continued) good news for fuel consumers in the U.S.

The Wall Street Journal recently reported on federal data released last week indicating a nationwide drop in gasoline consumption during the month of December, which contributed to oil prices throughout the world sinking to 11-year lows (as well as to hits on energy stocks).

The story points out that although gas prices have decreased over the last 18 months, consumption has kept them from dropping as quickly as oil prices have during the same time frame. WSJ shares data from AAA showing that, as of last Wednesday (Jan. 6), U.S. gasoline consumers were paying an average of $1.999 per gallon, which is down 8.9 percent from last year.

Analysts told WSJ that retail gas prices could — following significant decreases in wholesale markets nationwide — fall $0.10 or more per gallon this week. The resultant savings for drivers in the U.S. would continue the trend from last year, as WSJ reports — relying on data from GasBuddy — that stateside consumers saved $134 billion on gas in 2015 compared to 2014.

Last year, the story goes on to explain, those comparatively cheap gasoline prices, combined with higher employment rates, compelled U.S. consumers to drive more miles and buy less fuel-efficient cars than they had in the two years previous. According to December estimates from the U.S. Energy Information Administration, demand for retail fuel in the United States increased by 2.5 percent for 2015 overall.

But, at the tail end of the year, shares WSJ, there was a significant dropoff in cars on the road due to inclement weather and the holidays. For the first time since May, the four-week average for gasoline demand dropped below 9 million barrels a day.

Regardless of the likelihood that the decrease in gasoline consumption among U.S. consumers was a temporary situation brought about by the winter holidays, David Thompson, executive vice president at energy brokerage Powerhouse, commented to WSJ that “demand lost is lost forever.”

“Nobody is going to go drive twice as much because they were snowed in one day,” he concluded.


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