George S. May Business Blog

Retail gas prices hit five year low

Gas prices are at the lowest mark in five years and although we saw a jump in crude oil prices on Friday I project that we will continue to see a decline in the retail price of gasoline through next year. As the awful numbers of this holiday’s retail sales comes in, job uncertainty will become even more of an issue, thereby shrinking global trade and conituining the fall of the demand for energy on behalf of both consumers and businesses.  

“By Tuesday or Wednesday, we could easily see crude oil roughly $3 below what it is right now,” said Jim Ritterbusch, president of energy consultancy Ritterbusch and Associates.  

Tumbling crude prices have led to enormous declines in the price of retail gasoline. At the pump, retail gas prices fell six-tenths of a penny overnight to a new national average of $1.642 a gallon Friday, well below the year-ago average of $2.981 a gallon, according to AAA and the Oil Price Information Service. The last time retail prices dipped this low was 58 months ago.

The Organization of Petroleum Exporting Countries, which accounts for about 40 percent of global supply, has announced huge production cuts, 4 million barrels a day to be specific, in an attempt to try and stop the decline in prices. Crude has given up 70 percent of its value since July, and this month alone it has fallen by more than $17 per barrel, a 30 percent decline.

Tom Kloza said he’ll know that crude prices are poised for a sustained rebound when global demand matches last year’s levels for several weeks in a row.

Christoffer Moltke-Leth, head of sales trading for Saxo Capital Markets in Singapore, provided an interesting insight as to why demand is down so far:

“I think a lot of CEOs want to put everything bad into the fourth quarter because the market expects it to be bad so why not put everything you can in there,” he said. “There’s going to be a lot of bad corporate news during the next few weeks, and that’s going to reinforce the demand destruction theme for crude.”

Will the retail price of gas continue to fall? How far?

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