With the Fourth of July on the horizon Wednesday, Tri-City area families are flying Old Glory on homes and businesses, planning family events and, in many cases, preparing to take a summer vacation.
Current low gas prices compared to early 2012 should be a welcome financial break for families, whether they are headed to the mountains of Gatlinburg, Tenn., the Grand Canyon or the beaches of the Florida panhandle.
According to data compiled by Louisianagasprices.com, average retail gasoline prices in Louisiana have fallen 8.1 cents in the past week, averaging $3.05 per gallon yesterday.
This is 26.3 cents lower than a week ago and 32 cents lower than the same time last year.
Don Briggs of the Louisiana Oil and Gas Association said the recent drop in fuel prices was “interesting” because everyone expected them to be higher in prior months.
He attributed lower global demand to the unexpected fuel price break currently enjoyed by Tri-City residents.
“Oil prices did not reach the $140 per barrel mark we were expecting months ago because of less global demand,” Briggs said. “At one point, oil prices reached $114 per barrel and it was feared it could reach as high as $140 per barrel, but now, it is about $84 and I expect it to stay there (in the near future).”
He said normally, prices spike in the summer due to increased demand and refineries having to change the gas formula to lower emission, “boutique gasoline, which is a totally different gas than we use during the cooler months.”
Briggs said this usually drives gas prices up, but the low global demand has countered this price rise to keep gas prices at about $3 per gallon.
He said increased domestic production has also contributed to lower prices and countered fears of Iran interfering with oil production and transportation in the Middle East.
“The price is driven primarily by supply and demand, and with an increase in daily domestic production, from 5 million to 6 million barrels, due primarily to shale operations in Texas and North Dakota, prices fell,” Briggs said. “We are less dependent on foreign oil. Also, improving geopolitics have also helped. Gas prices spiked when Iran threatened to close the Strait of Hormuz, a waterway in which 25 to 30 percent of the world’s oil is transported, but those threats have subsided.”
Briggs said another final factor contributing to lower, stable prices is the Organization of the Petroleum Exporting Countries (OPEC).
He said the organization likes oil prices to be between $80 and $90 per barrel, and they generally increase or decrease production to keep it in that range.
“They still control the world’s oil prices, and people became accustomed to paying for gasoline with oil in this price range (about $3 per gallon locally), so they keep it here,” Briggs said.
According to the AP, the price of oil fell below $84 a barrel today, unwinding some of the massive price gains made Friday, when investors cheered the latest EU plans to tackle the continent’s debt and economic woes.
Signs of an economic slowdown in China also weighed on markets.
Friday, crude soared $7.27 to close at $84.96 in New York after the leaders of the 27 European Union countries said that they would seek to centralize regulation of European banks and, if necessary, bail them out directly, instead of funneling loans through governments that already have too much debt. Evidence of a weakening Chinese economy also dented confidence in commodity markets. Chinese industrial production fell to a seven-month low, according to HSBC’s purchasing managers’ index.
Oil prices were also weighed down by the strengthening dollar, which makes crude a less attractive investment for traders using other currencies. The euro was down to $1.2601 from $1.2646 on Friday in New York.
Gasoline futures fell 3.98 cents at $2.5920 per gallon. Natural gas slid 3.9 cents at $2.785 per 1,000 cubic feet.