Consumers Get Relief at Pump

11/13/13
 
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from The Wall Street Journal,
11/13/13:

Falling Gas Prices Offer Hope for Holiday-Shopping Boost.

U.S. gasoline prices have fallen to their lowest level in nearly 33 months amid a boom in domestic oil drilling, leaving consumers with some extra disposable income just in time for the holiday-shopping season.

Tuesday’s national average price of $3.18 a gallon—26 cents below a year ago—was the lowest since Feb. 22, 2011, when it was $3.17, according to AAA, which tracks daily gas prices. The automobile club predicted that the national average could fall close to $3 a gallon by year’s end because of abundant supplies, declining seasonal demand and lower crude-oil prices.

The respite at the pump was welcomed by Heidi Pickerell, president and chief executive of Meals on Wheels of Shawnee and Jefferson Counties Inc. in Kansas, who said the prices made it easier to find volunteers to deliver for the nonprofit group.

The price decline is being driven by refiners, which are producing more gasoline than U.S. drivers need, particularly in the nation’s midsection. The extra fuel ends up in storage tanks around the country. Domestic gasoline inventories were at 210 million barrels in the first week of November, up nearly eight million barrels from a year earlier, according to the Energy Information Administration.

Normally, refiners would cut back when inventories are high. But they are earning fat profits from converting petroleum—plentiful in the Midwest thanks to the boom in shale-oil production—into diesel for export to Europe and Latin America.

Gasoline is produced in the same process but it isn’t as widely used abroad, leaving the U.S. market awash in the fuel. Gasoline futures have fallen by 16% since late August, ending down 0.4% on Tuesday at $2.5864 a gallon.

“Refiners are still making money on diesel, but gasoline is almost a byproduct,” said Sarah Emerson, managing director of consulting firm ESAI Energy.

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