Several factors have been driving pump prices lower, beginning with a sharp drop in oil prices. The cost of crude oil plunged more than 20 percent from the start of October to mid-November, driven by a broader market sell-off and the growing consensus that global oil supply is outstripping demand.
Crude oil is the raw material for petroleum products like gasoline, diesel and jet fuel, so a tumble in the cost of crude translates to a drop in fuel prices. The full extent of the oil market sell-off isn’t yet baked into consumer costs, so analysts think pump prices will keep falling into the holiday weekend and beyond.
“We’re at $2.62 today,” said Andrew Lipow, president of Lipow Oil Associates. “I expect we’re going to head on down to a national average of $2.50 by the end of the month.”
Commodity watchers say the pressure on fuel prices will probably persist until the first full week of December, when OPEC, Russia and several other producers meet. The group is expected to agree to production cuts, which aim to prevent oversupply and tend to boost oil prices.
But other factors are keeping a lid on prices at the pump.
The United States is sitting on large stockpiles of gasoline. Lipow notes that inventories across the country are 5 to 10 percent higher than at this time last year. In the East Coast, stocks are about 20 percent above year-ago levels.