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Gas Prices: Finally, Some Relief at the Pump for U.S. Motorists

What's the skinny on gasoline prices for U.S. motorists/consumers? By and large, the news is good -- a likely continued decline in pump prices, following a summer of sky-high prices.

The average U.S. price of unleaded regular gasoline dipped another penny Monday to $3.60 per gallon, according to data compiled by gasbuddy.com.

What's more, retail gasoline prices are down about 10 cents in the past month, and down about 35 cents since peaking in May, at which time the average price for regular unleaded push $4 per gallon. (Many high-cost U.S. cities experienced gas prices well above $4.)

Are We There Yet?

"It took the end of summer for a drop in retail gasoline prices, but I'm sure motorists won't complain that we're finally seeing some drops in prices," said Patrick DeHaan, a senior petroleum analyst at GasBuddy.com told denverpost.com.

However, if U.S. consumers aren't celebrating the recent downward trek in gas prices, that's understandable: gas prices are still a gargantuan 87 cents or 32 percent higher than a year ago, in September 2010, when regular unleaded averaged $2.73 per gallon, nationally.

What's triggered this year's surge in gasoline prices? Energy analysts say most of the rise stemmed from the roughly $20 surge in crude oil prices this spring to about $110 per barrel due to the civil war in Libya, which removed more roughly 1 million barrels per day from the daily global oil supply.

However, with rebels having chased Libya's Muammar Gaddafi from power and the nation now being led by a National Transitional Council, oil prices have retreated about $25 to $85 per barrel since spring -- lowering the core commodity cost of gasoline, resulting in a downtrend in prices. Oil traded Monday at mid-day down $2.31 to $85.61 per barrel.

Autumn Ritual: Falling Temperatures, Falling Gas Prices

In addition, a seasonal factor should take even more pressure off gasoline prices: Labor Day marked the end of the U.S.'s summer driving season, and demand is expected to follow a traditional pattern -- down thru the end of December. That lower demand should decrease gas prices even more.

Further, energy analysts are quick to point out that there's no shortage of oil in the world -- inventories in the U.S., for example, remain relatively high.

Energy/Economic Analysis: Therefore, assuming there is not a supply disruption at another major oil producer, such as Nigeria, Venezuela or Mexico, and assuming the U.S.'s refinery system is not shut down for an extended period by a hurricane/tropical storm in the Gulf of Mexico, gas prices should continue to trek lower this autumn.

However, motorists will have to remain patient. It's true -- gas stations raise prices quickly and lower prices slowly. And the reason is profit maximization: after the price of gasoline declines at the wholesale level, gas stations attempt to "hang on to the higher profit" realized from the larger spread between the wholesale and retail price for as long as they can -- usually until a competitor's gasoline prices forces them to lower the price.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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