With memories of having paid all-time-high prices for gas earlier this year, U.S. consumers are about to get a break for the holiday season: $3-a-gallon gas in much of the country.
With U.S. supplies rising and demand fizzling, wholesale prices are sinking fast and will soon be reflected at the pump. Now averaging $3.35 a gallon nationwide, prices are expected to drop to about $3.20 a gallon within the next two to three weeks. Consumers in many states could find prices at $3 a gallon or even less , says Tom Kloza of the Oil Price Information Service.
"We've gone from an industry that was worried about enough gas to one wondering how it will deal with all of this gas," Kloza says. "And we haven't seen the bottom yet."
In California, Oregon and Washington -- where motorists were forking out up to $5 a gallon in October due to oil refinery problems -- there will be even greater relief. "Ironically, the biggest declines should take place on the West Coast and Pacific Northwest," Kloza says. Oregon "spot" wholesale prices fell to $2.36 a gallon this week, the nation's lowest.
"All of a sudden, we're at a 71/2-month high in supply, and demand is just tanking," says Brian Milne of energy tracker Telvent DTN. Moreover, many refineries have been running close to full capacity.
December's price plunge will have little effect on overall 2012 prices, forecast at a record average $3.63 a gallon, up 12 cents from 2011. Consumers will spend about $482 billion filling up their tanks, up 2.3% from last year's $471 billion record, according to motorist group AAA.
How is 2013 shaping up? Despite five consecutive years of declining consumption, tensions in the Middle East and intermittent supply issues have inflated pump prices.
Yet the U.S. now uses 500,000 to 700,000 barrels less crude oil a year than in 2007.
A slow-growth economy, which could take a bigger hit if the country slips into a post-fiscal-cliff recession, could further dampen demand.
"We'll still have these bipolar swings where regional markets take off higher when there are hiccups and breakdowns," Kloza says. "But on balance, I would bet that 2013 will be a cheaper year for prices."
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