Untitled Document

AAA projects national average gasoline price falling below $2 per gallon
by Christmas

With motor fuel prices heading further downward this month, the AAA motor club projects that the national average price could fall below $2 a gallon by Christmas, for the first time since the recession year of 2009.

AAA made that projection on Nov. 16, when it noted that the average retail gas price had fallen for 10 straight days to $2.16. It also said motorists in 41 states could already find fueling stations selling gas below $2.

Throughout 2015, pump prices for both gasoline and diesel have remained well below year-earlier levels and reached five- or six-year lows.

This came even as a number of states took action to either increase their per-gallon fuel fees to support infrastructure improvements or froze their price-linked fuel tax rates to prevent state transportation funding from shrinking along with fuel prices.

The steady price declines have more than absorbed the state revenue actions and left their residents paying less at the pump while investing more in projects.

The U.S. Energy Information Administration said average gas prices on Nov. 16 were 71.6 cents a gallon lower than at the same time in 2014, while average pump prices for diesel – used mainly by freight-hauling trucks across the supply chain – were down by $1.18 from a year earlier.

AAA's forecast looked for the pricing downtrend to continue. "A bearish sentiment prevails with global petroleum prices," it said, "and traders are following the recent terrorist attacks in France to determine what effects it may have on the market. Global supply continues to outpace demand, while a strengthening U.S. dollar, which makes crude oil more expensive for buyers holding foreign currencies, is expected to keep a ceiling on prices into 2016."

AAA also said that "U.S. crude oil inventories continue to build, and . . . are within reach of hitting record levels set this past April. For the first time in more than two months, the U.S. oil rig count increased on [Nov. 13]. While this measure is not the best indicator of production, it reportedly reinforced the expectation that U.S. production rates will remain high and keep the market oversupplied in the near term."