Gas prices likely to fall as refineries resume production
DALLAS -- Gasoline pump prices are poised to drop by year end, if history is any guide, as refineries resume production, Europe exports more fuel to the East Coast and Americans drive less.
Prices at service stations may fall about 6.3 percent to $3.54 a gallon, according to eight years of seasonal data compiled by Bloomberg. Gasoline deliveries to the United States from Europe may rise 35 percent, according to the median of eight estimates in a Bloomberg News survey. Demand has declined an average of 3.6 percent from July through December during the past five years, Energy Department data show.
While prices usually drop during the third quarter, this year is different because plants on the East Coast and in the Virgin Islands were permanently shut, reducing supply. Pump prices rose as high as $3.871 a gallon last month, a record for the period, AAA data compiled by Bloomberg show, feeding the perception that President Barack Obama won't do as well as Republican challenger Mitt Romney in lowering prices, according to a Bloomberg poll.
"The market is expecting the return of supply as we go through the course of October and the refineries in Europe get through their maintenance period," Andy Lipow, president of Lipow Oil Associates in Houston, said by phone. "Between now and the election, prices will fall moderately, 10 to 15 cents a gallon, but they won't have much of an impact on the election."
Production is so constrained that any surprise can lead to magnified market moves. An explosion at Irving Oil Corp.'s plant in Saint John, New Brunswick, on Sept. 26 that did no damage to the main part of the refinery, sent gasoline up 2.3 percent in 10 minutes on the New York Mercantile Exchange.
Gasoline for October delivery surged 19.77 cents, or 6.3 percent, to $3.342 a gallon Sept. 28, its last day of trading, capping a 23 percent gain since June, the largest third-quarter increase since 2005 when Hurricanes Katrina and Rita shut almost 30 percent of U.S. refining capacity.