Autumn gas prices expected to hit a 4-year low
Retail gas prices could drop another 20 cents, bringing them to their lowest level since fall of 2010.
The national average price for a gallon of regular gas, already down to $3.37, could drop another 20 cents-good news for consumers this fall ahead of the holiday shopping season, according to Gasbuddy.com.
Analysts say prices could fall to a range of $3.15 to $3.25, and that more than 30 states can expect prices under $3 a gallon.
Typically when gas prices fall, it has a positive impact on consumer spending. Gasbuddy says that due to the decline in prices consumers will spend $2.5 billion less on gas this fall than they did last year and that the money saved could trickle into other areas of the economy.
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Prices have fallen for a several reasons, the first of which includes seasonal factors. First, every fall the industry switches from its summer blend of gas, to the cheaper winter blend. Second, as the back-to-school season kicks off, families travel less and demand for gas drops as a result.
Additionally, crude prices have seen a steep drop over the last month, West Texas Intermediate is down more than 3 percent during the period and down more than 11 percent in the last three months. When crude prices fall, it ultimately impacts gasoline prices because refiners pay less for the underlying product.
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And crude prices could see even further pressure.
The Department of Energy reported Wednesday that crude inventories for the week of Sept. 12 were up 3.7 million barrels, surprising traders who were expecting to see a slight decline.
The buildup in inventories shows that the U.S. market is well supplied. Even before the DOE report, Platts said that total inventories are roughly 2 percent higher than the five-year average.
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"There just aren't a lot of factors that will take crude higher right now. The market is well-supplied and geopolitical issues don't appear to be too threatening," said Anthony Grisanti, president of GRZ Energy.
Grisanti thinks the fact that supplies are above the five-year average is significant. "The U.S. is producing more product. That's the bottom line, and as long as that continues, it will pressure prices," he said.
Traders expect domestic oil prices to fall under $90 a barrel in the short term, even though it bounced Tuesday on a slightly weaker dollar, comments from OPEC, Chinese stimulus and an equity rally ahead of Wednesday's Fed statement.
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"Dollar strength is an important factor. As long as the dollar Index stays over $84, it will send crude lower," Grisanti said.
But buyer beware. Grisanti and others point out that lower gasoline prices could be short-lived. Even though retail gas prices tend to bottom out between Thanksgiving and the Martin Luther King holiday, they rally again in the spring.
"Production cuts take time to implement. I don't think producers will go down that road because before you know it, spring demand will be back on the table," Grisanti said.
-By CNBC's Jackie DeAngelis
