By Brian Milne, Refined Fuels Editor for DTN
A lockdown in credit has triggered a massive sell-off in energy commodities as speculators unwound positions to raise cash amid the financial crisis, while economists increasingly expect a recession or worse that would lower demand for gasoline.
Typically, retail gasoline prices would trend lower in October as demand after the summer weakens until holiday travel in November and December. Gasoline also costs less to produce during the winter months because refiners do not have to worry as much about the release of emissions into the atmosphere that are more volatile during the hot weather summer months.
Gasoline demand is down significantly this year, 4.5% in the past month against the same period in 2007, as consumers continue to conserve fuel.
However, the national supply of gasoline remains at extremely low levels—the lowest since 1967. Additionally, some metro areas in the Southeast, namely Atlanta and Nashville and surrounding counties, continue to struggle with low supplies because of the disruptions caused by hurricanes Gustav and Ike. Supply is gradually increasing for these markets, with the tightness to continue for at least another week.
Nonetheless, wholesale prices for these markets fell sharply last week, reacting to the crisis on Wall Street and Washington, D.C. that is quickly spreading globally.
Last week, retail gasoline prices for Atlanta broke below $4 gallon and continue to tick lower, averaging near $3.90 gallon. Retail gasoline prices in Nashville have progressively edged lower since the third week in September but started to inch higher this weekend.
Retail gasoline prices will continue to decline in most cities nationally with many exceptions. Namely, consumers in the Northeast and upper Mid-Atlantic should expect retail prices to hold steady or turn higher over the coming week.
About the author
Brian L. Milne is the Refined Fuels Editor for DTN—a leading business-to-business provider of real-time commodity information services. Milne has been focused on the energy industry for nearly 14 years as an analyst, journalist and editor. He can be reached at email@example.com.