SAN FRANCISCO (MarketWatch) — That record-breaking stretch of ever lower gas prices could finally be nearing its end.
U.S. drivers are paying an average of $ 2.08 a gallon on Friday, the cheapest since May 2009, travel and leisure group AAA said. Prices have fallen for a stunning 113 consecutive days, the longest streak since AAA started keeping track of daily averages 15 years ago, as the price of crude CLG5, +3.01% has plunged amid a supply glut.
But the pace of the decline at the pump has slowed. Moreover, gasoline prices usually head higher in February due to refinery maintenance ahead of the spring and summer driving season in the U.S. So even if oil prices stabilize, gas prices could start creeping up.
“There is room for gas prices to keep dropping due to a nationwide supply glut, yet the volatile futures markets this week suggests an uncertain future,” said Michael Green, a AAA spokesman. “(Friday’s) average dropped by only fractions of a cent, which was the smallest daily decline since November.”
Gasoline’s stumble, particularly in the final months of 2014, fueled the sharpest decline in U.S. inflation since 2008. Prices are $ 1.22 cheaper per gallon than a year ago.
U.S. inflation dropped 0.4% in December, the largest monthly drop in six years, the U.S. Labor Department reported Friday.
It’s possible the national average will drop below $ 2 per gallon in January, but there could be headwinds, Green said. Gas prices typically begin a springtime rise of between 30 cents and 50 cents a gallon by early February due to seasonal refinery maintenance, he said.
There are already signs that demand may be heading higher. Earlier this week, the U.S. Energy Information Administration called for an uptick in gasoline demand for 2015. Gasoline consumption will increase 60,000 barrels a day this year to 9 million barrels a day, it said in its monthly outlook. In December, it said gasoline demand would fall to 8.8 million a day.
The EIA’s latest weekly crude and crude products report said refineries operated at 91% of their capacity for the week ended Jan. 9, and gasoline production averaged 9.1 million barrels a day. In the comparable week last year, refineries, running at 90% capacity, produced 8.3 million barrels a day.
Crude futures rose on Friday after an international energy watchdog predicted collapsing prices could cut into supply growth from countries outside the Organization of the Petroleum Exporting Countries.
Oil prices could resume falling, however, if there is no sign of big cuts to production. Moreover, there’s still room for lower prices and profits: a price slide to $ 40 a barrel would make only 1.6% of the world’s oil output unprofitable, Wood Mackenzie said last week.