Oil market ‘mini collapse’ sparks unexpected gas pump price drop

ALBANY — Gas prices dropped unexpectedly over the past week when the crude oil market turned suddenly bearish.

Normally, gas pump price averages rise steadily from February until Memorial Day weekend, but a drop in the crude oil market reversed the trend. On Monday, the U.S. average for retail gas was $2.298 on both major surveys — AAA’s Daily Fuel Gauge Report and GasBuddy.com’s Fuel Insights. While that was about 2 cents higher than Feb. 13, it was about a penny and a half cheaper than the previous Monday.

Georgia motorists were also paying about 2 cents less per gallon Monday compared to last week, with the average of the two surveys at $2.185, up about a half-cent from last month.

In metro Albany, drivers were paying $2.113 Monday, also down a half-penny in a week and seven-tenths of a cent more than Feb. 13.

“The oil market suffered a ‘mini collapse’ last week, following reports of a record build in domestic crude oil,” Mark Jenkins, a spokesman for AAA–The Auto Club Group, said. “This will postpone the customary springtime gas price spike. Prices could drop 5-10 cents in the short term, but this downward trend may only be temporary.”

U.S. crude settled Friday at $48.49, its lowest since Nov. 29, the day before OPEC announced an agreement to reduce output in the first half of 2017 to bolster the world crude oil market.

“A sudden plunge in the price of oil is likely to weigh on gas prices, at least temporarily,” Patrick DeHaan, senior petroleum analyst for GasBuddy.com, said. “With little warning or expectation, crude oil last week broke out of the rut it had well established, with crude prices falling out of a three-month range of $51-$54 per barrel to $49. Fundamentals of oil have weakened, and with last week’s large 8.2 million barrel rise in crude oil inventories, the market has turned decidedly bearish for now.

“Naturally, when oil prices take a beating such as they did last week, one might expect gasoline prices to move in lockstep, but due to the complex relationship of oil and gasoline prices and the middleman — U.S. refineries — motorists may not see as large a decline at the pump as they may hope for, but certainly stay tuned. I remain optimistic that the annual spring rally at the pump could be less severe than expected, but remain cautious as it remains difficult to know where the new path will lead oil prices in the week ahead.”

Market experts have noted that for the past five years, gas has risen 30-75 cents per gallon from the February low to the start of driving season, usually around Memorial Day in late May. Experts say the likelihood is that the upward market pressure will return, possibly on the lower end of that range.

“Despite OPEC’s efforts to balance the market, traders were reminded this week that the global glut in oil still lingers,” Jenkins said. “Although it could take several weeks, analysts believe oil prices could recover by the time OPEC meets again in May. Meanwhile, refineries will have to battle rising demand as they begin pumping summer-blend gasoline into the market in April and May. All these factors could push pump prices 20-40 cents higher by Memorial Day.”

Meanwhile, drivers are paying significantly more than they did in mid-March last year, when U.S. drivers were paying an average price of less than $1.94. Georgia drivers last year were paying about $1.875, while metro Albany motorists were paying $1.87.

The Albany metro area — Dougherty, Lee, Worth, Terrell and Baker counties — was tied with Macon for second-lowest among Georgia Metropolitan statistical areas Monday, according to the Daily Fuel Gauge Report. The lowest average Monday was metro Augusta at $2.093. The highest average was in the Atlanta MSA, which was at $2.216.