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By Robert Rapier on Sep 3, 2012 with 8 responses

4 Reasons Why Gas Prices Are About to Fall Rapidly

While U.S. gasoline prices have been on the rise for the past two months — and are presently $0.15/gallon higher than they were a year ago — I expect that gasoline prices will start to fall rapidly in the weeks ahead. There are four reasons for this.

  • First is that the spike from Hurricane Isaac will be short-lived as damage to oil and gas infrastructure seems to be limited. Facilities will be back online relatively quickly.
  • Second is that summer driving season is at an end, and demand for gasoline will now decline.
  • Third, the transition to winter gasoline (explained in depth in Refining 101: Winter Gasoline and Why Summer Gasoline Means Higher Prices) begins on September 15th. This will both lower the cost and increase the supplies of gasoline.
  • Finally, the recent run-up in oil prices appears to be already priced into the cost of gasoline.


All of these factors point to the strong probability that gasoline prices will fall regardless of any government action between now and the election. Of course there are always factors that could trump these. More hurricanes that keep capacity offline, an outbreak of conflict with Iran, and the terrible accident at Venezuela’s 645,000 barrel-per-day Amuay refining complex are all factors that would work to increase prices. But taking everything into account, the safe bet seems to be that gasoline prices will fall just as they normally do in the fall.

This does not even take into account the likelihood that the Obama Administration will release more oil from the Strategic Petroleum Reserve. This will be the topic of my next column.

Link to Original Article: 4 Reasons Why Gas Prices Are About to Fall Rapidly

By Robert Rapier

  1. By Edward Kerr on September 4, 2012 at 7:32 am

    Robert,

    I had sort of expected the same scenario that you outline expecting that the administration would seek lower prices right before the election. I see it as both good and bad news. Like anyone else, I will be happy to pay less at the pump (though I don’t drive much these days) but the intermittent rewards of lower gasoline prices have the effect of  muting  the public’s concern over the fossil fuel issue. It seems that the public becomes less concerned that the government develop a real “national energy policy” that has direction and a purpose beyond the temporary price of fuel at the pump. As long as we fail to demand  a sane energy policy the industry (which is resisting change) will continue to call the shots.

    Regards,

    Ed

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    • By Optimist on September 5, 2012 at 6:18 pm

      I had sort of expected the same scenario that you outline expecting that the administration would seek lower prices right before the election.

      You’re missing the point, Ed. The administration has nothing to do with any of this. Despite frequent claims to the contrary.

      It seems that the public becomes less concerned that the government develop a real “national energy policy” that has direction and a purpose beyond the temporary price of fuel at the pump.

      Having watched both the administration, and Congress, in action, I’d very much prefer them not to tackle a national energy policy. Unless you meant as comic relief.

      As long as we fail to demand  a sane energy policy the industry (which is resisting change) will continue to call the shots.

      Luckily the industry is not waiting for “sane energy policy”, but continues to produce fuel, in spite of the hatred directed at it.

      As for calling the shots: you (and any other consumer) can always call the shots by chosing not to purchase.

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      • By OD on September 7, 2012 at 7:53 pm

        Nice rebuttal. 

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  2. By Ty on September 4, 2012 at 8:15 am

    What a load of tripe. 

    until/unless we

    1.  Eliminate the ‘trade’ premeium and get wall street out of the picture.

    2.  Stop giving drillers every little tax break they ask for.

    3.  Stop distillers from making us compete with Europe for our own fuel.  If it is distilled here it STAYS here. 

    4.  Stop giving drillers a free pass, stop the FRACKING!

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    • By ed on September 4, 2012 at 2:26 pm

      Why don’t you just go out and get you a horse.  Your ideas are so progressive.

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    • By Robert Rapier on September 4, 2012 at 2:51 pm

      What a load of tripe. 

      Why don’t you check in closer to the election and then we can discuss whether it was tripe?

      2.  Stop giving drillers every little tax break they ask for.

      Yes, I can see how that would lower gas prices. LOL. 

      3.  Stop distillers from making us compete with Europe for our own fuel.  If it is distilled here it STAYS here. 

      So if it is distilled here from oil made from Canada, we should not sell it back to Canada? Or anyone else on the open market? If you want to close our borders around the petroleum markets remember that we are still heavily dependent upon petroleum imports. Doesn’t seem like the best idea to me. Seems like tripe.

      RR

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    • By Mr Pee on September 4, 2012 at 5:44 pm

      Yup. You sir have hit thy nail upon its head. I totally agree. 

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  3. By Tim Weiman on September 5, 2012 at 7:49 pm

    Robert,

    The politics of oil refining can be a bit strange. If someone built a manufacturing business that imported raw materials not available in the U.S. and exported finished products while creating hundreds of high paying jobs, most American would think it is a good thing.

    But, oil refiners do exactly the same thing (import crude/export gasoline) and people suggest there is something wrong . This is true even when the U.S. Federal government has at least two major policies designed to reduce gasoline demand – CAFE (higher fuel efficiency standards) and RFS (renewable fuel standard).

    At the same time, there are folks opposed to domestic drilling and the deployment of technologies designed to increase production (e.g., fracing) that is especially needed by refineries with negative economics (e.g., Conoco Trainor, PA, Sun Philadelphia, PA) to stay open and maintain the employment these facilities provide.

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