HOUSTON -- Gasoline pump prices are poised to drop to the lowest since February 2011 by New Year's Eve as supplies increase more than demand, providing a lift for consumers in an economy struggling to recover from the deepest recession since the 1930s.
Retail prices will probably sink to an average $3.15 a gallon by Dec. 31 from $3.344, said Michael Green, a spokesman in Washington for AAA, the nation's largest motoring organization.
In York, the average price of a gallon of regular unleaded was $3.30 Thursday morning, down from $3.31 a week ago, $3.39 a month ago, and $3.71 a year ago, according to the AAA Fuel Gauge Report.
Nationally, the highest seasonal inventories in three years are set to rise as plants return from scheduled maintenance. Refining capacity in the
fourth quarter will be 410,000 barrels a day higher than last year while demand climbs 10,000 barrels, the Energy Information Administration estimated Oct. 8.
U.S. refiners are making the most gasoline ever for this time of year, having expanded to take advantage of ample domestic and Canadian crude.
U.S. oil production grew in September to the highest level since May 1989 as advances in drilling techniques boosted output from shale formations. The U.S. met 87 percent of its own energy needs in the first six months of 2013, on pace to be the highest annual rate since 1986.
Continuing a trend: "We're in a longer-term downtrend with retail gasoline prices because of reduced demand, increasing U.S. production of oil as well as increased refining capacity for gasoline," Phil Flynn, senior market analyst at Price Futures Group in Chicago, said in a telephone interview.
Retail prices have fallen 25 cents since the end of August, as the 2013 Atlantic hurricane season was shaping up to be the first in almost two decades without a major storm disrupting Gulf Coast production. The season runs from June 1 to Nov. 30.
As plants return from seasonal work, production should increase. In the past five years, refinery runs have climbed an average 303,000 barrels a day in the fourth quarter as seasonal repairs ended.
The U.S. was awash in gasoline as refiners shut units for maintenance. Inventories were 217.3 million barrels as of Oct. 11, the most for this time of year since 2010, EIA data show. As many as 900,000 barrels a day were planned to be offline in October, the peak of the U.S. fall turnaround season, according to Amrita Sen, chief oil market strategist at Energy Aspects Ltd., a research company in London.
Production of the fuel in the week ended Oct. 11 increased to 9.34 million barrels a day, 3.2 percent higher than a year earlier and the most for this time of year in EIA data going back to 1982. There was enough gasoline in the U.S. to cover 24.6 days of supply, 6.8 percent above the five-year average.
Retail prices are 32.1 cents below a year ago, data from Heathrow, Fla.-based AAA show.
The last time the national average dipped below $3 a gallon was Dec. 21, 2010, according to AAA.
Some filling stations in 23 states are already selling gas for below $3, AAA's Green said. The cost for drivers in as many as 10 U.S. states may average less than $3 by year's end, according to Green. The average price last Dec. 31 was $3.292, after falling 37.3 cents between Oct. 21 and the end of the year.