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Gas predicted to fall below $3 and stay there for rest of year

By Gargi Chakrabarty, Rocky Mountain News (Contact)

Published October 14, 2008 at 12:05 a.m.

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Gas sells for $2.95 a gallon at United Mart & Gas at Federal Boulevard and Evans Avenue on Monday. Gasoline prices in the state have fallen nearly $1 a gallon since setting a record on July 17.

Photo by George Kochaniec Jr. / The Rocky

Gas sells for $2.95 a gallon at United Mart & Gas at Federal Boulevard and Evans Avenue on Monday. Gasoline prices in the state have fallen nearly $1 a gallon since setting a record on July 17.

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Gasoline prices across Colorado have tumbled nearly $1 a gallon since this summer's record high of $4.093 a gallon on July 17, and experts say prices will slide below $3 a gallon in the coming weeks and stay there through the end of the year.

There's more good news: Experts say the $4-a-gallon days are over for the foreseeable future - that is, until the U.S. economy recovers.

Unless events such as a major refinery fire or a pipeline bursts send prices back up again, experts say they will continue to slide - due to the threat of a global recession, a supply glut and weak demand.

On Monday, several gas stations in metro Denver were selling gas for less than $3 a gallon.

Mark Larson, executive director of Colorado Petroleum Marketers, said that gas should hold at or below $3 a gallon but unpredictable events could disrupt supplies and push up prices.

"Most of the soothsayers on Wall Street are saying that prices should hold through the end of the year," he said. "But, as we have seen in the past, it doesn't take much of a glitch in the system for prices to climb upwards, and the only reason I make that argument is that refineries are operating at 90 percent capacity and any disruption - say, a fire - will affect prices in the short term."

The Colorado average Monday was $3.271 a gallon, according to AAA's fuelgaugereport.com. Metro-area stations were as low as $2.95 a gallon, with the Denver average at $3.234 a gallon.

Nationwide, pump prices dropped 35 cents, or 9.5 percent, in the two weeks ended Oct. 10, according to oil industry analyst Trilby Lundberg's survey of 7,000 filling stations nationwide. The average price of regular gas fell to $3.31 a gallon.

Crude oil, which accounts for about 73 percent of gasoline's pump price, has fallen 46 percent from a record $147.27 a barrel on July 11.

Gas at $3 a gallon is here to stay, said Bryant Gimlin, energy risk manager at Fort Lupton-based Gray Oil Co., a wholesale distributor of gasoline and diesel. "We are going to see lower prices from now to the end of the year, and summer 2009 will be lower than summer 2008.

"Four-dollar-a-gallon gas is behind us for a while, until the economy turns around, which could take years."

The wholesale price of gas in Denver was $2.15 a gallon Monday. Add in 43 cents in state and federal taxes, another 12 cents in transportation charges and retail margins, and the price comes to $2.70, so prices likely will trend down further.

U.S. gasoline demand fell 9.5 percent last week, the biggest decline in more than three years, implying a slowing economy could be curtailing driving, a MasterCard Inc. report showed Oct. 7.

Drivers bought an average 8.625 million barrels of gasoline a day in the week ended Oct. 3, down from 9.536 million a year earlier, MasterCard, the second-biggest credit card company, said in its weekly SpendingPulse report.

It was the 24th consecutive weekly decline and the biggest since September 2005, after Hurricane Katrina sent pump prices to record highs.

Gas use in the U.S. was 5 percent lower than the prior week, according to the report. The decline comes as tightening credit markets, bank failures and rising unemployment claims may indicate that the U.S. is entering a recession, reducing fuel consumption.

Fewer Americans filed first- time applications for unemployment benefits last week as job losses related to the Gulf Coast hurricanes subsided.

Initial jobless claims declined by 20,000 to 478,000 in the week that ended Oct. 4, from a revised 498,000 the prior week, the Labor Department said. The number of people staying on benefit rolls climbed in the prior week to the highest in five years.

Comments

  • October 14, 2008

    6:58 a.m.

    Suggest removal

    anya writes:

    It's funny how, whenever the Rethuglicans are in a tight race, the price of gas drops right before the election. It'll stay down until about March, and then look-out.

    It's a pity that much of the East coast that relies on Heating Oil has already purchased their first tank full at the high price. It's funny how that works out, isn't it?

  • October 14, 2008

    7:47 a.m.

    Suggest removal

    EXrepublican writes:

    So after years of Gas prices going through the roof, they allways seem to come down right at election time. So we should all run out and vote republican... NOT.

    Obama/Biden '08

  • October 14, 2008

    9:13 a.m.

    Suggest removal

    binaryman3 writes:

    Gas prices since price controls were lifted many years ago have increased in the spring and fallen in the fall due to demand. The level of rise and fall is effected by US and State government policies towards supply and demand and worldwide demand is effecting prices also.

    Be careful what you vote for! You just might get what you voted for!

  • October 14, 2008

    9:17 a.m.

    Suggest removal

    sidney9435 writes:

    the gas price falling had nothing to do with politics

    it was the hard work of 100 million gas buddy forum members who implemented our plan to destroy the oil company speculators and drive the price of oil down..we succeeded beyond our wildest dreams..unfortunately when we bankrupted the speculators it caused consequences to the stock market that we could not foresee...we did not know the speculation in hedges was so deeply rooted.