Gas and Oil Prices Drop Due to European Economic Concerns
WASHINGTON – The U.S. Energy Information Administration (EIA), and AAA, released their most recent reports, with both noting falling retail gasoline prices and oil prices. EIA said it revised its outlook for gas prices downward, now saying that it expects the average retail price of gasoline to be around $3.79 per gallon from through September, which is 16 cents per gallon less that the EIA estimated in its previous outlook.
This number is close to the current national average for gasoline at retail, which AAA said was $3.78 per gallon on May 7. This price is four cents less than the week of April 30 through May 4 and 20 cents less than the same time a year ago.
Although EIA revised its outlook downward, it stated there is a 22% chance that prices could exceed $4 per gallon in September based on the market value of futures and option contracts for New York Harbor Reformulated Blendstock for Oxygenate Blending (RBOB). The EIA said that an RBOB contract price exceeding $3.30 per gallon has traditionally led to retail gasoline prices above $4 per gallon.
In terms of what’s affecting prices, AAA said the results of recent European elections over the May 5-6 weekend (in France, for example, where Francois Hollande was elected as President), and growing concern over negative global economic conditions, put downward pressure on oil prices. Also, as the U.S. dollar grows stronger when compared with foreign currencies, crude oil futures, which are priced in dollars, become more expensive to invest in, putting more downward pressure on oil prices.
As for oil production in the U.S., it’s on the rise, according to the EIA. The organization said it expects U.S. total crude oil production to increase 0.5 million barrels per day (bbl/d) in 2012, at 6.2 million bbl/d, which is the highest level of production since 1998. The EIA also expects U.S domestic crude oil production to increase to 6.4 million bbl/d in 2013.