ECONOMIC SNAPSHOT | FUEL PRICES

The gasoline equation

By JAMES OSBORNE
Staff Writer josborne@dallasnews.com

By TROY OXFORD
Staff Artist toxford@dallasnews.com

Gasoline prices are falling fast, but why? Oil prices have stayed relatively high, and history would indicate that gas prices would do the same. Some of it is simple seasonality; gas prices always dip in the fall. But in recent years, the math has changed. From speculation on Wall Street in gas futures, to a huge supply of domestic crude to more stringent fuel efciency standards, experts run the gamut in explaining the gap between whats coming off the tankers and what were paying at the pump.

Salvation at the pump

Texas gas prices are at their lowest level since last December. And analysts believe theyre poised to go a lot lower. Texas regular retail gasoline prices
$4 per gallon

A Lone Star bargain

Thanks to a relatively small gasoline tax and proximity to Gulf Coast reners, Texans enjoy some of the lowest gasoline prices in the country. Lowest average gas prices, as of Nov. 1
1 2 3 4 5 6 7 8 9 10 Lubbock Rio Grande Valley Santa Fe, N.M. Albuquerque, N.M. Oklahoma City, Okla. Houston Topeka, Kan. Omaha, Neb. Quad Cities, Iowa Fort Worth $2.949 $2.951 $2.959 $2.974 $2.976 $2.977 $2.984 $2.985 $2.989 $2.996

Gas prices in select cities, as of Nov. 1

Dallas Denver Atlanta Miami Boston Chicago New York City Anchorage Los Angeles Honolulu $3.004 $3.206 $3.264 $3.329 $3.389 $3.518 $3.577 $3.619 $3.707 $3.977

$3.50

$3.00

$2.50 ON D 2012 J F 2013 M A M J J A S O

Price difference between WTI Spot Price (per barrel) and U.S. regular gasoline (per gallon)
$150

$120

The gap between oil and gas prices widens what gives?
A skirmish in the Middle East, oil prices go up and youre stuck paying a premium at the pump. But that old adage isnt holding true as gasoline prices drop off despite benchmark crude either rising or holding steady.

$90

$60

$30

$0 1991 92

93

94

95

96

97

98

99

00

01

02

03

04

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06

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08

09

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Gasoline consumption dropping

In 2007, the United States was closing in on burning 400 million gallons of gasoline a day. But between the recession, an aging population and tighter fuel efciency standards on new cars, consumption is down 9 percent over the past six years. U.S. total gasoline sales/deliveries by prime supplier
450 million gallons per day

No end in sight
Futures contracts on gasoline are trading below current levels. NYMEX Settlement Price RBOB Gasoline Futures
$3.00 per gallon

$2.75 400 $2.50 350 $2.25

300

250 2005 06

$2.00 07 08 09 10 11 12 13 2014 2015

SOURCES: U.S. Energy Information Administration, GasBuddy.com, CME Group

The bottom line

I have a hard time imagining another runaway rally to $4 a gallon. You have a continent with unbridled drilling activity with reners having access to an awful lot of different blends of oil that are priced anywhere from $7 to $30 below global prices. The United States has this big discount, and we the consumer are the beneciaries of this. Tom Kloza, chief oil analyst, GasBuddy.com Theres intense price competition on every street corner. And with more and more [gas stations] being built here in Texas, the margins are becoming even more compressed. Its a tough environment. As anyone in the oil business will tell you, trying to predict fuel prices is a fools errand. But with domestic supplies bubbling over and consumption dropping, gasoline prices look like theyre on the way down.

Chris Newton, president, Texas Food and Fuel Association

James Osborne, staff writer, The Dallas Morning News