Weary drivers have been receiving some good news recently - gas prices continue to drop. Markets all across the country - Charlotte, San Diego, Houston, Boston - have all seen gas prices dropping regularly in the last 3-4 weeks or even longer. Information gathered from organizations like AAA and the Oil Price Information Service bear this fact out. In San Diego as of the first week in June, price for regular gas had fallen 20 out of 21 consecutive days - almost 20 cents drop in just three weeks. Chicago-land drivers have seen a similar drop of 24 cents per gallon in the last month. Gas in Charlotte has fallen from $3.70 to $3.44 in the last month. You'll find similar drops in other places around the country. The only real exception is on the West Coast, which is seeing pressur eon gas prices because of refinery issues out west.
This is counter to what's traditionally seen after the Memorial Day weekend. Gas prices usually start rising as the summer driving season gets underway. As we've written about before, the summer driving season brings increased demand and consumption as we head out on the roads more. The increased demand meshes with the capacity of the national gas supply; more accurately, the national gas supply struggles to keep up with the demand because the refineries have had to switch over from winter-blend fuel to summer-blend fuel, and this knocks their supplies down for a while. The two forces come together to see gas prices go up at precisely the time drivers fill up more.
So this recent drop in gas prices is a welcome sight. But what's the explanation for it? Last year, the Bell Performance blog wrote a piece on how gas prices here at home are affected by seemingly unrelated things like the strength of the US dollar in the world economy. And this is a little bit of a similar situation. Simply put, we have the Europeans to thank.
Countries across Europe - Greece, Italy, Spain and others - are in economic turmoil right now. Everyone's worried and nobody really can predict what's going to happen next. Is Greece going to drop out of the Eurozone? Will Italy's economy spiral into ruin because of national debt? Europe's got big financial problems right now. And this means that those countries probably aren't going to be using as much oil and gas for a while. This creates an excess on the world market and help relieve pressure on gas prices here at home.
If we can get through the summer without major hurricane damage to refineries, and combine that with an easing of conflict and tension in the Middle East, some analysts think gas could drop below $3 a gallon. That's funny. Imagine 6-7 years ago what we would think if we knew we'd be hoping for $3 gas.
This post was published on June 6, 2012 and was updated on November 19, 2013.