Corner station challenged to limbo

It was only Sunday when I posted Limbo cat says "meow-whee!" as prices fall.

Today, all four neighborhood outlets had dropped their price another dime to $3.19.  I might have expected prices that low next week, but not this week and especially not at the start of the week.  Good thing I just said prices would fall, not how far or how soon.

The next drop happened yesterday, when the three stations down the street lowered their prices to $3.15.  The corner station is still at $3.19, but I'm sure it's only a matter of time before they meet the challenge.

The Detroit Free Press has noticed the drop, but before I quote what they had to say, I'm checking the price environment and the year-over-year changes.  First, GasBuddy shows the Detroit average falling from $3.32 to $3.26, sinking right past $3.29 on Monday.  I called it when I wrote "By tomorrow or the day after, I wouldn't be surprised if the Detroit average fell to $3.29, making the neighborhood stations in line with the pattern."  Just the same, the three stations are still more than a dime cheaper than the metro average, keeping them ahead of the curve.  They must really expect prices to continue falling.

Before I leave the subject of GasBuddy and the price environment, here's what I wrote about the national average.

[It] shows the national average at just above $3.30.  That makes a prediction I posted in Fear premium a dead cat bounce as price falls three times in five days look good.

The longer-range forecast is still for lower prices.  For example, Calculated Risk trumpeted EIA Forecast: Gasoline Prices expected to decline to $3.30 per gallon in December last week.  I'd be surprised if it took that long for the national average to go that low.

We're almost there.

The national average plunged through that level on Monday and is now at $3.27.  We made it.

Next, prices are now twelve cents below where they were last year on this date, when they were selling regular for $3.27.  I expected lower prices year-over-year, but not this much.

Follow over the jump for the Free Press on Michigan gas prices and Bloomberg on crude oil.

Michigan gas prices tumble to 10-month low

Gasoline prices in Michigan tumbled to their lowest point in about 10 months, and analysts expect prices to keep falling.
...
"Decreased demand, relatively lower crude prices and the cost savings associated with producing winter-blend fuel will likely keep downward pressure on the price for retail gasoline," AAA Michigan said in a statement. "Barring any major disruptions in supply, drivers are expected to see some of the lowest autumn prices since 2010."

Tom Kloza, chief oil analyst of GasBuddy.com, said prices are heading below the $3 mark.
...
Refineries in the Midwest have also ended maintenance initiatives in recent weeks, increasing supplies and lowering prices further.

Political turmoil in the Middle East has had little effect on gas prices, economists noted.

I'm surprised at how ineffective the fear premium has been lately.

What about the future?

Still, he cautioned that $3 gasoline isn't necessarily here to stay.

"I don't think that becomes the new normal," he said. "I do think that becomes a level that people will get used to in the offseason."

In other words, it looks like my prediction that the national average will stay above $3.10 this year won't come true.  I'm not upset about that.

Bloomberg has the latest on crude oil and RBOB gasoline, reporting Tuesday WTI Closes at 17-Month Low on Supply Outlook; Brent Drops.

West Texas Intermediate crude ended at a 17-month low before a government report that may show U.S. inventories increased last week. WTI’s discount to Brent widened.
...
WTI for November delivery fell $1.49, or 1.7 percent, to $88.85 a barrel on the New York Mercantile Exchange, the lowest settlement since April 22, 2013. Volume was 19 percent above the 100-day average. WTI traded at a $3.26 discount to Brent.

Brent for November settlement declined 68 cents, or 0.7 percent, to $92.11 a barrel on the London-based ICE Futures Europe exchange, the lowest since June 2012. The volume of all futures traded was about 27 percent above the 100-day average.

$85 for WTI and $90 for Brent, here we come.

Gasoline futures lost 1.9 percent to $2.3683 a gallon, the lowest close since January 2011.

With wholesale prices like this, $3.00 at the pump by the end of the year looks like a definite possibility.