Gas prices have dipped below $3.00 a gallon in South Carolina and may soon see similar figures in several other states, industry trackers are reporting – U.S. fuel costs overall dropping to their lowest levels since the beginning of 2012.
According to the widely-quoted Lundberg Report, the average pump price for regular unleaded gas, across the U.S., is beginning the week 49 cents a gallon lower than where gas prices peaked in early April. And most analysts expect the trend to continue for at least the near-term as the soft recovery weakens demand for fuel.
But the sudden stall in what had seemed like a rush to $4 and even $5 gas is having a significant impact on the American auto market. While overall car sales have only gained momentum in recent months, demand for hybrids, plug-ins and battery-electric vehicles has fallen sharply, from a peak of 4.6% of the overall U.S. market in April to an estimated 3.4% for June, according to LMC Forecasting.
(For more on June U.S. car sales, Click Here.)
The sudden collapse of fuel prices appears to be driven by a variety of factors. The weak U.S. recovery has softened demand. Meanwhile, some of the refineries that were off-line earlier in the year for maintenance and repairs are now back in business.
A slowing of the Chinese economy, as well as Europe’s ongoing financial crisis, further weakened demand for petroleum in recent weeks. On Friday, oil prices had fallen to nearly $78 a barrel, near eight-month lows. And early Monday trading suggested the trend was still downward. The figures are off about 26% since peaking in early April.
“Until a permanent solution is found to the eurozone’s problems, the global economy is likely to muddle through this crisis for a considerable while, and persistent bouts of risk aversion are likely to haunt the oil markets, making any sustained upside difficult,” said a report from London’s Barclays Bank.
But that translates into good news for U.S. motorists.
Even California has now seen the cost of gas drop below the $4 mark for the first time in about half a year, unleaded regular currently pumping at $3.809, according to GasBuddy.com. The fuel price tracking service notes that only in Alaska and Hawaii are motorists still paying more than $4 as the work week begins.
The lowest major market is Greenville, South Carolina, at $2.904. The most expensive in the Continental U.S. is Santa Barbara, at $4.099. Honlulu is tops for the entire country, at $4.164.
Fuel prices are still fluctuating, sometimes wildly, when influenced by global or even regional developments – such as the temporary shutdown at several refineries in Illinois that led to a gas price spike in parts of the Midwest earlier this month.
“Gas prices are dropping in Michigan because the earlier issues with Midwest refineries have apparently been resolved,” said AAA Michigan spokeswoman Nancy Cain.
And prices very well could continue downward even with the upcoming Independence Day holiday. With tens of millions of Americans taking to the roads for the July 4 celebrations fuel costs might normally be expected to surge, at least temporarily. But observers say there’s still plenty of downward pressure. And the fact that the celebration comes mid-week, with fewer drivers likely to travel great distances this year, is likely to curb the normal holiday profit taking.
AAA Michigan spokeswoman Cain forecasts drivers in the state will likely pay less than they did even a year ago during the July 4 holiday. That may very well be echoed around the U.S.