Will Gas Prices Continue To Tank? For 113 Consecutive Days, Prices Have Fallen

Gas prices have fallen for 113 consecutive days. While some are relishing the price that hovers in some areas of the country around two dollars per gallon, others are keeping a wary eye on the stock market, among other things, that may be an indication of whether or not gas prices will fall, rise, or stay where they are.

The travel and leisure group AAA says that U.S. drivers are paying an average of $2.08 a gallon today, the cheapest since May 2009. Considering the economic fact of inflation, that’s pretty amazing. Gas is cheaper than it has been in five and a half years.

Consumers probably don’t want to hear this, but the pace of the decline at the pump has steadily slowed. If history is an indicator of the future, gasoline prices usually head higher in February due to refinery maintenance ahead of the spring and summer driving season in the United States. Even if oil prices stabilize, gas prices could start creeping up, says Michael Green, an AAA spokesperson.

“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. (Friday’s) average dropped by only fractions of a cent, which was the smallest daily decline since November.”

Ouch. Not quite the news we were hoping for. Gasoline’s price drop, particularly in the last quarter of 2014, caused the sharpest decline in U.S. inflation since 2008. The price of gas per gallon is $1.22 cheaper today than one year ago. That sounds terrific, but that sharp of a decline can cause other economic problems in a country who is widely dependent on oil for income.

In a calm before the storm, it’s possible the national average will drop below $2 per gallon in January, but there could be headwinds of what is to come, 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. Gas typically hits a high demand in July.

There are already subtle but sure signs that demand may be heading higher. Earlier this week, the U.S. Energy Information Administration called for an increased estimate 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. This means as demand rises, prices are likely to rise.

Russell Price, senior economist at Ameriprise Financial Inc. in Detroit, who correctly projected the year-over-year change in the core index, explained that as plunging commodity prices “filter through the system, it should take nine months to a year, then we should start to see inflation in the U.S. and around the world start to pick back up.”