The road to Memorial Day typically pumps up gasoline prices as motorists gear up for summer travel, but this year that formula is shifting into reverse.
Gas prices are suddenly falling as oil prices plummet.
The price of a gallon of regular fell four cents a gallon in the last week alone. The Energy Information Administration reported Monday that the nationwide average price is $2.37. down from $2.41. A few pennies a gallon may not sound like a lot, but the savings add up quick -- $1.50 per fill-up of a 15-gallon tank for every 10-cent drop.
When 2017 began, analysts thought gasoline might approach $3 per gallon by Memorial Day, but that prediction was off. Instead, the number of U.S. gas stations selling fuel for less than $2 per gallon has nearly doubled since last week to 5,177, according to GasBuddy, a gas price tracking website.
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"This is usually ripe territory for prices to be skyrocketing," GasBuddy analyst Patrick DeHaan said. But "we may dip quite a bit in the next week or two. It’s a boon to motorists that are seeing a consistent decline for the last few weeks just ahead of Memorial Day weekend."
With full employment, stock market hitting records and a newfound consumer preference for SUVs and other gas-thirsty family vehicles, expect motorists to go full throttle into the travel season.
"My hunch is it’s still going to be awfully congested in the summer. We’re still going to use a lot of gas," Oil Price Information Service analyst Tom Kloza said.
Oil prices have fallen more than 13% over the last month. After dropping to below $46 per barrel in midday trading Monday, the U.S. benchmark crude rose to close at $46.43, up 21 cents for the day. In 2011, prices topped $100 a barrel.
"There's a part of me that says, geez, every investment bank can't be wrong," Kloza said. But anyone projecting oil above $70 this year is "delusional," he added.
DeHaan said gas prices haven't caught up to oil's recent decline, which points toward gas prices falling.
Behind the trend: U.S. shale oil producers have gotten more efficient and lowered the price at which they can turn a profit, now at about $50 per barrel on average, Goldman Sachs analyst Brian Singer said in a research note.
And those oil companies have increased production after the Organization of the Petroleum Exporting Countries (OPEC), led by largest member Saudi Arabia, reached a deal in November to lower its output.
OPEC members are expected to authorize an extension of a least three months on those production cuts when members meet later this month, according to Capital Economics.
OPEC's initial cut was meant to stabilize or boost prices, and it worked for a few weeks.
But speculation is mounting that Saudi Arabia could bail on the production cuts if it concludes it's losing too much market share to American producers.
"I wonder how long the Saudis are going to go before they throw in the towel and say, 'Hey, enough of this,'" DeHaan said.
One wild card is President Trump's upcoming trip to Saudi Arabia, the outcome of which could affect traders' perception on Saudi Arabia's plans for oil production.
Kloza said Trump's interest in bolstering American energy producers will likely guide his strategy.
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