HOUSTON: For the first time in five years, $2 petrol is making a comeback in some parts of the US, just in time for the Christmas holiday.
Retail stations scattered across the US South and Midwest are about 20 cents shy of the $2-a-gallon mark. In New York, petrol futures slid more than 13 cents on Friday in response to Opec’s failure to cut oil production. That decline alone could drag down pump prices by as much as 20 cents a gallon, Michael Green, a spokesman for the Heathrow, Florida-based motoring club AAA, said by telephone.
“We could see the cheapest 1 percent of stations get within a few pennies of $1.99 over the next two weeks,” Patrick DeHaan, a senior petroleum analyst at GasBuddy Organisation Inc, said by telephone from Chicago. “We’ll see at least one station in the nation at $2 by Christmas. And that’s not really a prediction at all. That’s more like a certainty.”
The motor fuel has slid by almost a dollar a gallon in the US from this year’s peak, giving Americans at least $500 annually in extra disposable income by IHS Inc estimates. The last time the country’s average fuel price was below $2 was on March 24, 2009, while in the grips of the recession.
Petrol futures sank below $2 a gallon this month for the first time since September 29, 2010. The average pump price was $2.792 on Thursday, down 90.4 cents from this year’s peak of $3.696 on April 26 and the lowest since October 8, 2010, data compiled by AAA show. The average has fallen for 64 consecutive days, the longest streak since 2008, Avery Ash, AAA’s director of federal relations based in Washington, said.
The Opec, responsible for about 40 percent of the world’s oil supply, will maintain its collective crude output target at 30 million barrels a day, Saudi Arabia’s Oil Minister Ali bin Ibrahim Al Nuaimi said after discussions in Vienna on Thursday.
“Given that Opec has decided not to cut production and, for all intents and purposes, are entering into a market share war with the rest of the world, $2 a gallon could be in the cards,” said Andy Lipow, president of Lipow Oil Associates LLC, an energy consulting firm in Houston. “I don’t think anyone would have said that at the beginning of the year, or a month ago, or even a week ago.” The nation’s cheapest petrol was at a DM Food Mart in Oklahoma City that was selling regular for $2.18 a gallon on Friday, DeHaan said.
The first place to reach $2 petrol will probably be somewhere in the US Southeast where fuel taxes are low and stations have cheaper supplies flowing in from oil refineries along the Gulf Coast, said Ash. “We’re talking about limited markets in maybe South Carolina, Mississippi, Tennessee.”
At the Stripes petrol station in Karnes City, Texas, a store that overlooks horse pastures and two drilling rigs in the Eagle Ford shale formation, petrol was selling for $2.32 a gallon, down from $3.49 in the middle of summer.
Joseph Bjorgaard, the store’s assistant general manager, drives his 2001 metallic blue Ford Expedition 90 miles to Corpus Christi every weekend for church and to visit friends. “I was bumming couches from friends so I wouldn’t have to buy fuel for the extra trip,” he said. The chances of petrol prices averaging below $2 a gallon across the nation remain “highly unlikely,” Ash said. “You’re still looking at a national average at $2.75. To get to $2, you’d need to see crude prices drop another $25 to $30 a barrel.”
Oil futures in London and New York sank to the lowest in more than four years on Opec’s inaction. “The average driver may be shocked by how much fuel prices drop before we see a low,” Green said. WP-BLOOMBERG
