Gas prices fall as weather, output calm markets

[September 28, 2013]  NEW YORK (AP) -- Gasoline prices have fallen steadily throughout September, and drivers should look forward to even cheaper fill-ups in the weeks ahead.

The national average price for a gallon of gasoline is now $3.42, down from $3.59 on Sept. 1. The price is the lowest it's been at this time of year since 2010 and is likely to keep falling.

"It's a layup for me to predict lower prices until Columbus Day weekend," says Tom Kloza, Chief Oil Analyst at GasBuddy.com and Oil Price Information Service, which tracks retail and wholesale gasoline prices.

Wholesale gasoline prices have fallen faster in recent days than pump prices, so drivers can expect to pay even less as the pump prices catch up.

Gas prices tend to decline soon after Labor Day, but last year they didn't start going down until mid-October. There are a number of reasons for this fall's drop in price, experts say:

• Refiners can switch to cheaper blends of gasoline in the winter months as clean-air rules are relaxed.

• Gasoline demand declines in the fall after the summer driving season ends. At the same time supplies rise, because refiners are still making gasoline as they keep operations humming to make heating oil for winter and diesel and jet fuel for shippers.

• This year, refineries have been relatively problem-free. There have been no hurricanes, and few unexpected problems at refineries or pipelines, unlike last year.

Even high oil prices haven't stopped gasoline's decline. Oil briefly topped $112 in late August as a U.S. threat of military action against Syria made the market nervous about Middle East supplies. The price of oil has since fallen, but remains above $100 per barrel. Still, gasoline has dropped to its lowest price since Jan. 31.

Friday, oil fell 16 cents to close at $102.87 per barrel on the New York Mercantile Exchange.

Last year at this time drivers were paying 37 cents per gallon more than they are this year, on average, because Hurricane Irene and refinery and pipeline problems disrupted gasoline production in August and September. California prices rose sharply in late September, then hit a record $4.67 per gallon in early October.

There are no such problems this year, though California drivers are again paying the highest average price outside of Hawaii and Alaska, at $3.95 per gallon, according to AAA, OPIS and Wright Express. South Carolina drivers are paying the least, at $3.11 per gallon.

For the year, the national price is on track to average $3.56 per gallon, 7 cents less than last year's record of $3.63. That would save U.S. drivers $9 billion this year.

Despite the recent drop, the national average is unlikely to fall back to $3.29 per gallon -- this year's low, set in early January -- unless the price of oil falls under $100 per barrel, GasBuddy's Kloza said.

That could happen if tensions in the Middle East don't flare up again and the hurricane season remains tame. U.S. oil production is expected to hit a monthly rate in October that the country hasn't reached since 1989. Also, Saudi Arabian exports typically rise in late fall and winter as the country uses less of its oil to generate electricity for air conditioning, pushing global supplies higher.

[Associated Press; By JONATHAN FAHEY]

Jonathan Fahey can be reached at http://twitter.com/JonathanFahey.

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