Return of the $3 Gallon? U.S Gas Prices Are Falling Fast (BusinessWeek)

By Matthew Philips   September 17, 2014

Here is the price of gasoline in the U.S. so far this year:

Bloomberg Gasoline prices in 2014

The national average price of regular unleaded, now at $3.38 a gallon, is down 8 percent from the end of June. Tom Kloza, chief oil analyst at GasBuddy.com, thinks this year will bring the cheapest autumn gasoline prices since 2010. Last year drivers spent $40 billion at the pump in September, and Kloza thinks that bill will be at least $2 billion lower in 2014. The savings at the pump should help stimulate consumer spending in other parts of the economy.

Gas prices are cheapest in the South and highest in the Northwest. Shale oil being produced in North Dakota and Texas has had an easier time traveling south and east, while fewer trains have headed west, across the Rockies and into Washington and Oregon (though that is starting to change). Still, it’s a big difference. The average gasoline price outside Little Rock, Ark., is $3.05; near Seattle, it’s $3.87.

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GasBuddy.comHeat map of gasoline prices

This all starts with the price of oil, which makes up 66 percent of the cost of a gallon of regular gasoline. International crude prices have fallen 16 percent since the end of June, and U.S. prices have dropped more than 11 percent. Different parts of the country use different sources of oil to make gasoline. Most imported blends of light, sweet crude no longer come into the U.S. Gulf Coast, by far the biggest refinery base in the U.S.

Refiners are also getting ready to switch to the winter blend of gasoline, which is cheaper to produce but fetches lower prices. Over the last three years, the price of gasoline from September to November has fallen by an average of more than 30¢ a gallon. If that trend continues in 2014, it could put prices in some parts of the country below $3.

Unexpected events could always shake the oil marked. With the U.S. and its allies planning to step up attacks on ISIS this fall, oil prices could certainly spike by the end of the year. As long as U.S. production keeps rising, however, it should help keep prices in check.

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Philips is an associate editor for Bloomberg Businessweek in Washington. Follow him on Twitter@matthewaphilips.