Despite recent jumps in the cost of gas, drivers are poised to pay the lowest prices at the pump over the Fourth of July holiday weekend in at least five years.
AAA estimates the average price of $2.77 per gallon is down two cents compared to a week ago and down three cents from the peak price to date for 2015, set on June 15.
Going forward, the price of gasoline is still under pressure from the falling price of crude oil. Oil futures, a key indicator of prices to come over the next few months, dropped $1.54 per barrel, to $59.60 yesterday. That reflects both the relative value of the dollar and a steady excess of crude oil on global markets, according to the Energy Information Administration.
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Future prices are now some $46 per barrel lower than they were a year ago, the EIA reports. The drop comes despite steady escalation of forward purchases by the Republic of China’s equivalent of the U.S. Strategic Oil Reserve. The reduction of sanctions on Iran, a potential outcome of the U.S. Iranian negotiations on nuclear arms, could lead to an even greater supply of crude on global markets.
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While an Iranian nuclear deal could contribute further to the market’s oversupply if current sanctions are removed and Iranian oil returns to the global market, a string of terror attacks in France, Tunisia, and Kuwait have been closely watched for any impact on geopolitical instability in crude-producing regions in the Middle East and North Africa.
Escalating tensions in these regions have the potential to cause supply disruptions, which could contribute to price volatility in the near term. However, the drop in the price of oil futures indicated the impact to date has been minimal.
While pump prices are down across the U.S. this week, according to AAA, they are up four cents per gallon month-over-month, largely due to regional refinery issues that put upward pressure on the national average. Gas prices continue to reflect considerable yearly discounts with drivers saving an average of 90 cents per gallon compared to what they were pumping into their cars, trucks and crossover a year ago.
AAA’ s weekly analysis also notes that pump prices often fall leading up to the Independence Day holiday. However, a seasonal decline in the national average this year has been offset by supply shortages due to localized refinery issues and global crude prices that have recovered from multi-year lows this spring.
Drivers in the Pacific Northwest are paying some of the nation’s highest prices for retail gasoline. After 16 consecutive weeks, Alaska, at $3.47 per gallon has unseated California, at $3.45 per gallon as the nation’s most expensive market for retail gasoline and is followed by regional neighbors – Hawaii at $3.37 per gallon. Consumers in South Carolina, $2.45, are paying the lowest averages at the pump.
Drivers nationwide are paying considerably less at the pump to refuel their vehicles compared to a year ago. Retail averages are discounted by more than $1 in three states: Kentucky, at $1.02 less per gallon, Connecticutt , at $1.02 less and Michigan, $1.01, and motorists in 45 states and Washington D.C. are saving more than 75 cents per gallon year-over-year.
Since gasoline taxes in many states are linked to the sales tax, the reduction also means less money is available for roads in some of the states. However, increases in the gas tax to pay for infrastructure projects are scheduled to kick in July 1 in Georgia, Idaho, Maryland, Nebraska, Rhode Island and Vermont. The increases range from 0.35 cents to 7 cents per gallon. Michigan is studying an increase of its own.
California, however, is bucking the trend and decreasing its gas tax by 6 cents.
The federal gas tax has not been increased since 1993 and is not expected to rise this year.
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