With the latest government data showing early signs that American motorists are cutting back on gasoline purchases, this spring’s rapid run-up in pump prices may soon be coming to an end. Still, as long as oil supplies remain vulnerable and the price of crude stays high, there may be further prices spikes down the road.
The nationwide average price of a gallon of regular gasoline stood at $2.90 this week — up 72 cents from a year ago, but down a penny from last week, according to the Energy Information Agency. On the futures market, gasoline prices have slid nearly 20 cents in the past month.
After a much bigger-than-normal drawdown of gasoline inventories, this week’s EIA data showed gasoline stocks posting their second straight increase. Refiners typically switch over to making summer fuel blends in April, a process that was complicated this year by a phase out of the additive MTBE, which is used to cut air pollution in warmer weather.
“It’s sort of like a pit stop,” said Jim Benton, executive director of the New Jersey Petroleum Council. “You have to allow for some retooling of the refineries for the summer driving season. And that’s been accomplished.”
The weekly report showed that refiners are now running at 90.2 percent of capacity. High pump prices have also helped to draw more gasoline from overseas refiners. Gasoline imports hit a record week last week.
“The data suggests that refiners and importers are absolutely going gangbusters out there to take advantage of the highest wholesale prices in the world, and incredible profits," said Tom Kloza, who tracks gasoline prices at the Oil Price Information Service.
Meanwhile, drivers appear to be taking their foot off the accelerator. Gasoline demand typically rises steadily this time of year as the weather warms and the summer driving season approaches. But Wednesday’s report showed a slight drop in demand. On Monday, the government scaled back its forecast for gasoline demand for the summer.
Analysts caution that the government data on gasoline supplies could be skewed this year by the switchover to ethanol as an additive, which accounts for about 10 percent of the volume of finished gasoline sold at the pump.
But there are other signs that pump prices have finally reached the point where consumers will begin making changes in driving habits that will ease demand for gasoline.
Bill O’Grady, an energy analyst at A.G. Edwards, has been tracking the relationship between the average hourly wage and price of gasoline. Historically, that average hourly wage has covered the cost of about 10 gallons of gasoline, but as gas prices rise, the average hourly wage buys fewer gallons. At current prices, the average hourly wage will only buy 5.7 gallons, said O’Grady — a level reached only a few times in the past two decades.
“When that number gets to six or below, you usually see declining consumer sentiment and you usually see consumers become increasingly sensitive to the price of gasoline,” he said.
Gas prices typically peak around Memorial Day, after refiners have built stockpiles to get through the peak summer demand. In recent years, gas prices have also gone up later in the summer, as demand picks up again in August. That may happen again this year if pump prices level off and consumers fell less pinched.
But any forecast of gasoline prices these days comes with two major asterisks. The first is the upcoming hurricane season, which last year threw a major crimp in oil supplies and knocked out a large portion of U.S. refining capacity.
The other major uncertainty is the price of crude oil, which continues to seesaw on news that can potentially impact supplies. With global oil production stretched to the limit, even a small interruption in supplies can have a big impact on prices.
“As long as the the international situation — and our reliance on very unstable places in the world — continues, we’re going to be subject to the roller coaster that we seen in prices,” said Jim Benton.