U.S. consumers are paying all-time highs for gasoline in 2012, but are about to get a break for the holiday season: $3 a gallon gas in much of the country.
With U.S. supplies rising and demand fizzling, wholesale prices are sinking fast and will soon be reflected at the pump. Now averaging $3.37 a gallon nationwide, prices are expected to drop to about $3.20 a gallon within the next two to three weeks. Consumers in many states could find prices at $3 a gallon or even less in many states, says Tom Kloza of the Oil Price Information Service.
Weve gone from an industry that was worried about enough gas to one wondering how it will deal with all of this gas, says Kloza. And we havent seen the bottom yet.
In California, Oregon and Washington where motorists were forking out up to $5 a gallon in October due to oil refinery woes that forced long lines and closures at some outlets there will be even greater relief.
Ironically, the biggest declines should take place on the West Coast and Pacific Northwest, Kloza says. Oregon spot wholesale prices fell to $2.36 a gallon this week, the nations lowest. California drivers have already gotten some relief over the last four weeks, with prices falling to $3.66 from $3.94.
All of a sudden, were at a 7½-month high in supply, and demand is just tanking, says Brian Milne of energy tracker Telvent DTN. Moreover, many refineries have been running close to full capacity. Others, including a New Jersey refinery shuttered since superstorm Sandy, are back on line.
Decembers price plunge will have little effect on overall 2012 prices, forecast at a record $3.63 a gallon, up 12 cents from 2011. Consumers will spend about $482 billion filling up their tanks, up 2.3 percent from last years $471 billion record, according to AAA.
How is 2013 shaping up? Despite five consecutive years of declining consumption, tensions in the Middle East and intermittent supply issues have inflated pump prices.
Yet the U.S. now uses 500,000 to 700,000 barrels less crude than in 2007, levels influenced both by the economy and more-efficient vehicles.
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