I concluded Neighborhood stations at last year's lows already by writing "gasoline below $3.00 a the local pump, here we come." It arrived in my vicinity yesterday (today as I type this), when I saw two of the stations down the street at $2.99. The third was at $3.03. I don't expect that will last very long. Meanwhile, the corner station was in the middle of retreating from a charge into No Man's Land. Yesterday, it raised its price to $3.25 while the rest of the outlets held steady at $3.09. I'm sure it will eventually match the other three, although it might take all week. Even so, these are already the lowest gas prices I've recorded in the history of this blog so far.
The lower gas prices have been making news in Detroit since WXYZ noticed $3.00 gas. WXYZ followed up on that report by asking How low will gas prices go?
Follow over the jump for a look at the local and national price environment and the commodities markets to see what they foretell, as well as what is behind the price drop.
First, GasBuddy seems to be behind the curve, as it shows the national price hitting a low for the year so far of $3.18 the day before yesterday before going up slightly, while Detroit fell all the way to $3.12, also a low for the year so far, before rising to $3.15. I wouldn't be surprised if other stations followed the lead of the one on the corner by raising their prices yesterday. I expect that the metro average will go down when the site updates again. Even so, the neighborhood stations are again selling at a greater discount than usual. Based on the $3.12 low for Detroit, the $3.03 advertised by one of the stations down the street appears reasonable. The two stations at $2.99 are more than a dozen cents below the Detroit average and are leading the price drop by a few days, as they have been all month. Their operators must expect even lower prices and soon.
Reuters supports their expectations, as Bonds rally, stocks fall as global economy fears mount.
Brent and U.S. crude futures fell, a day after posting their biggest daily drop in years, with more production, less demand and deflation expectations weighing heavily.So much for the support levels of $90 for Brent and $85 for WTI. Right now, the support level for both is $80, something the Wall Street Journal pointed out in U.S. Oil Prices Rebound From Losses.
Brent lost 2 percent to $83.36 a barrel while U.S. crude fell 1 percent to $81.02.
On Wednesday, the U.S. benchmark fell as low as $80.01 a barrel on the New York Mercantile Exchange after U.S. retail sales data was released.The price bounced off $80, just as it should off a support level.
As for how long it's been since prices were this low, the WSJ article reported that this is the lowest close for WTI since June 28, 2012 and the lowest close for Brent since November 23, 2010. Those aren't the only commodities posting multi-year lows.
November reformulated gasoline blendstock, or RBOB, settled down 3.15 cents, or 0.4%, at $2.1487 a gallon, the lowest level since Nov. 23, 2010.Prices at the pump will continue to head down for the foreseable future.
As for why oil prices are falling this low, Reuters offers this analysis: Sinking oil prices may curb U.S. output too slowly for Saudis.
Saudi Arabia effectively started a global oil price war this month aimed at quickly denting U.S. oil output. Slowing a U.S. drilling boom, however, could take more than a year.Looks like the Saudis have decided that trying to maintain a support level of $90 was trying to catch a falling knife and that it would be wiser to get out of its way and hope that it stabs someone else, namely us. That may be smart on their part, but it shows that they are not really our friends. Then again, that shouldn't be news to anyone.
Many observers expect a downward spiral of global oil prices to rapidly dampen shale oil drilling in the United States, slow production growth and help bolster prices. Small producers vulnerable to sudden price moves may have to slow spending, fast reducing the amount of oil gushing to market.
At stake is not just the fate of a U.S. drilling frenzy that has transformed the North American energy picture and powered the U.S. economy, but the shape of the global market as OPEC leader Saudi Arabia hopes to take share from U.S. producers.
Saudi Arabia has privately told the oil market that it is willing to allow prices to slide as low as $80 for a year or two, a strategy seen aimed at U.S. producers.