Gasoline Sheds 8¢ in a Week at State Pumps
50-Cent Slide Foreseen as Drop in Demand Deflates Crude Oil
LITTLE ROCK, AR — Gasoline prices have fallen nearly 10 cents a gallon
in the past week as crude oil lost steam because of weak demand in a
sluggish economy.
And if crude oil prices stay at about $125 a barrel, that would mean
50-cent relief at the pumps in the coming weeks, experts say.
AAA reported Thursday that an average gallon of regular in Arkansas
cost $3.890, down from a record $3.972 one week before, for a
difference of little more than 8 cents. Nationwide, prices were at
$4.026, down 9 cents in a week.
Crude oil for delivery in September finished up $1.05 at $125.49
Thursday on the New York Mercantile Exchange. Crude oil settled at a
record $145.18 on July 14.
“What we’re seeing is a meltdown,” said James Williams, an energy
economist who owns WTRG Economics near Russellville. “Crude prices have
dropped more in the last nine days than they’ve gained in the past 40,
so that’s clearly good news for the consumer.”
That’s news Jennifer Haywood can use.
The 20-year-old Little Rock resident who competes in Irish dancing
competitions across the country filled up a Ford Focus on Thursday
afternoon at the SITE gas station on Cantrell Road for $3.82 a gallon.
“I try to save as much as I can to put into my tank,” said the campus
police dispatcherfor the University of Arkansas at Little Rock. “This
weekend I’m going to St. Louis, and if gas gets cheaper, I can go to
Orlando for regionals in December.”
Consumers can thank themselves in part for the dropping prices, said
Phil Flynn, energy analyst for Chicago-based Alaron Trading Corp. “It’s
the height of the driving season, and hardly anyone is driving,” Flynn
said.
STABILIZING PRICES
Tom Kloza, director of the Oil Price Information Service, a
Gaithersburg, Md.-based firm that tracks petroleum pricing and news for
clients, wrote in an e-mail that he’s reluctant to say that the $145
oil earlier this month was the year’s high. “One or two weeks do not
make a trend,” he said.
“However, there is no question that we will see retail gasoline prices
continue to move lower into next week,” Kloza said. “There is much
catching up to do.”
He said that on the basis of the typical wholesale-to-retail numbers,
consumers could expect prices to fall to between $3.50 and $3.75.
“But one has to remember that gasoline retailers had the most rugged
200 days to start any year, so one can’t begrudge them getting a little
midsummer margin,” Kloza added.
Ann Hines, executive vice president of the Arkansas Oil Marketers
Association, said that it’s a huge relief to oil marketers and gasoline
stations to see prices easing. “It helps our industry and it helps our
customers,” she said. Marketers have been running into problems with
their credit limits, she said. It used to be that they would have 10
days to pay the oil companies after picking up the product. Because the
product is now so much more expensive, marketers pick up less of it and
their payment is due in three days. “There is no profit in gasoline” at
the retail level, she said.
Read Admire, 23, of Little Rock said gasoline prices have forced him to
ride his bicycle more and even if the price dropped 50 cents, it would
still be too much.
“They just jack it up and drop it down so people will think they are
getting a deal,” said the University of Arkansas at Little Rock senior
as he filled up his Ford sedan for $3.83 a gallon at the Arkansas 10
Shell Superstop.
According to the U.S. Energy Information Administration, the four-week
average demand for gasoline ending July 18 was down 3.6 percent
compared with the corresponding period a year earlier. At the same
time, total gasoline stocks were at 217.1 million barrels, up from
204.1 million a year earlier.
“It’s starting to weigh on prices, the market forces are at work here,
and our better conservation over the past few weeks,” Flynn said.
Mike Right, spokesman for AAA, said that not only is U.S. demand
dropping, but other parts of the world are also cutting back on fuel.
Williams added: “I think we’re seeing the realization that, in fact,
the economy does matter and it does matter to oil consumption… Our
problems are affecting the rest of the world, and that’s going to slow
consumption growth.”
POCKETBOOK PAIN
It’s also unlikely that consumers will start driving more just because prices drop a few cents, Kloza said.
“I don’t think this will bring back some of the demand we have lost
because of conservation and expense and the generally sour consumer
sentiment,” Kloza wrote.
Judy Dugan, research director for advocacy group Consumer Watchdog,
said consumers are suffering and even a 50-cent drop wouldn’t change
that. Gas is still up more than $1 from a year ago. “That’s still a
shocking hit to family budgets,” she said. “Even a year ago when gas
was at $3, it was a crimp in budgets.”
Kathy Deck, director of the Center for Business and Economic Research
at the University of Arkansas at Fayetteville, said that 50 cents would
give people more money to spend on everything else – assuming they
didn’t just start driving more again.
“When you’re looking at a 50-cent drop, I think that consumers are
becoming savvy enoughto realize that we are in a prolonged period of
relatively high prices even if there is a backing off,” Deck said, and
people won’t go out and start buying SUVs as a result.
A couple of stations in Jacksonville and Fort Smith had the lowest
prices in the state at $3.68 for regular, according to
Arkansasgasprices.com, a site where consumers can report gas prices.
Metro Little Rock had the highest average prices in the state for
regular at $3.877, according to AAA. Texarkana averaged $3.871, and
Pine Bluff wasat $3.868. Fort Smith and Fayetteville came in the
lowest, with $3.845 and $3.855, respectively.
The experts all agreed that some “future blips” in oil prices might
arise but that without an adverse geopolitical event or a natural
disaster, prices might be stabilizing.
“This is a signal that prices are at least moderating,” Right said. “There’s a lot of wild cards out there.”
TRADING IN
Some of those wild cards could be the commodity traders themselves,
such as the Dutch trading company accused by regulators of scheming to
“bully the market” by making a large number of trades at or near the
end of the trading day to move closing prices.
Commodity regulators in Washington have accused the trading company,
Optiver Holding, of making roughly $1 million in illegal profits by
manipulating the prices of crude oil, heating oil and gasoline over an
11-day period last year.
The complaint was filed in U.S. District Court in Manhattan against
Optiver, a proprietary trading fund based in the Netherlands; two
affiliated funds based in the Netherlands and Chicago; and three senior
company executives.
The lawsuit is certain to resonate loudly in Washington, where the
Senate is in the midst of debating proposals to tackle high oil prices
by curbing market speculation and where lawmakers have repeatedly
demanded tougher enforcement measures.
The company did not return a phone call to its Chicago offices seeking comment.
Regulators are accusing the defendants of making 19 separate attempts
at market manipulation in March 2007, involving three specific New York
Mercantile Exchange contracts – for light, sweet crude oil, for heating
oil delivered to New York Harbor and for gasoline, also for New York
delivery.
At least five attempts were successful, according to the complaint. In
three instances, it said, the illegal trading pushed prices of all
three commodities lower, while the other two resulted in higher prices
for gasoline and crude oil.
The lawsuit comes on the heels of a preliminary report released Tuesday
by the Interagency Task Force on Commodity Markets that found that
fundamental supply and demand factors – not speculation by investors –
were responsible for recent crude oil price increases. The task force,
led by the U.S. Commodity Futures Trading Commission, was formed in
June to evaluate the cause of the recent increases in the price of
crude.
Information for this article was contributed by Diana B. Henriques of
The New York Times and Sean Sposito of the Arkansas Democrat-Gazette.