After a peak in April, gas prices have slid downward as we head to the traditional start of the summer driving season. Does that mean more price drops between now and Labor Day?
In the world of anything having to do with petroleum prices, two mitigating factors could impact them, two analysts told NJ Advance Media. The first is potential summer hurricanes affecting Gulf of Mexico oil drilling and refining facilities, and the second is the June 4 meeting of the Oil Producing and Exporting Countries, or OPEC.
Where are prices now?
AAA reported a statewide average price of $3.51 a gallon for regular Wednesday, representing a 10 cent per gallon drop from the $3.61 price reported one month ago. Crowd sourced GasBuddy.com said the lowest reported prices for regular range from $3.13 and $3.19 a gallon.
“We expect peaks in April and May and rollbacks and here we are,” said Patrick DeHaan, GasBuddy petroleum analyst.
Prices and wild cards.
“We’ll go below $3.50 in the next week, then it’s all about the OPEC meeting in June,” said Tom Kloza, Oil Pricing Information Service global petroleum analyst. “In July and August, it’s about the weather.”
The two specific weather worries are hurricanes that could close gulf coast refineries and offshore drilling platforms and extreme summer heat that could affect refinery operations to produce gas from crude oil, he said.
A category 3 or higher hurricane could affect the hundreds of oil rigs in Gulf and the refineries inland, DeHaan said.
The worrisome factor is that water temperatures in the Gulf of Mexico and Atlantic Ocean warmer than usual. Current temperatures are about what they should typically be a month from now, both said. The U.S. Energy Information Administration forecasted a “strong hurricane season” as a risk.
“We’re seeing the types of temperatures we’d see on June 27, Kloza said. “We have La Niña conditions so there’s a higher chance for tropical storm activity.”
The National Weather Service forecast that La Niña conditions of higher water temperatures have a 49% chance of developing in June to August or a 69% chance of it happening between July and September.
Where are prices going?
Kloza said he sees prices dropping below $3.50 and for the first part of the summer driving season, with some drivers being able to buy regular for $3.25 a gallon.
“I’d say this year will be comparable to last year and there is a little less demand,” he said. “In July and August, it’s about the temperatures and for the last 100 days of the year. Most of the country will flirt with $3 gas.”
For Memorial Day, the Port Authority predicted 4.2 million vehicles will use its bridges and tunnels over the holiday weekend, consistent with volume from the 2023 holiday period. AAA is more optimistic, forecasting over 1 million New Jersey residents will travel 50 miles or more between Thursday and Monday.
Overall demand is down because there are commuters still working hybrid or remote schedules who are driving less. That means less demand for gas and lower prices. More fuel efficient vehicles also impact demand, Kloza said.
“It will be a summer most Americans feel decent at pump,” he said. “Optics see price slide at the beginning of the summer giving confidence I can hit the road and not worry about gas prices.”
What happens between July 4 and Labor Day is the “million dollar question” with less confidence if there is a hurricane, De Haan said.
Political factors?
Gas prices are a political football regardless of which party holds the White House, both experts agreed. Market conditions such as the price of crude oil on commodities markets, demand and either geopolitical or weather events that might disrupt supply are the major determiners.
The U.S. Department of Energy announced it was selling off 1 million barrels of gasoline and closing the Northeast Gasoline reserve that was created in 2014 after Hurricane Sandy created gas shortages. Republicans claimed it was an election year ploy to lower prices, while USDOE officials said the sale was mandated by bipartisan legislation, Reuters reported.
About 900,000 barrels is stored in the Port Reading section of Woodbridge. By comparison, there are 368 million barrels of crude oil stored in the nation’s strategic petroleum reserve.
“Selling 1 million gallons is like spitting in the ocean,” Kloza said.
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Larry Higgs may be reached at lhiggs@njadvancemedia.com. Follow him on X @CommutingLarry.
