The average price in California for regular gasoline has fallen to $2.33, which is 44.8 cents lower than two weeks ago and over $2 lower than California’s all-time high set in June of this year at $4.588, according to the California Energy Commission.
Over the last month prices have sunk 92 cents in California and $1.00 nationally to an average of $2.20, according to a survey released Tuesday by the motorist group AAA.
Despite falling gas prices, demand has continued to slip. The number of credit card swipes at gas stations across the country decreased by 3.9 percent compared with last year’s numbers, as reported by a weekly Mastercard survey.
The main reason for these decreases is that crude oil prices, as determined by the Organization of the Petroleum Exporting Countries, have decreased significantly.
Basket price, which is a weighted average of oil blends from various OPEC countries, has dropped $70 over the last six months, according to a weekly OPEC survey.
As a result OPEC decided to remove 1.5 million barrels per day from world oil markets beginning this November by applying output allocations to member countries, according to a recent Platts survey.
The reduction will be divided among 11 of OPEC’s 12 members, excluding Iraq, and will be implemented over the coming months. OPEC next meets Dec. 17 to discuss the effects of their efforts.
OPEC’s decision to reduce output of crude oil is a reaction to the downward trend in consumption, said Platts director of oil John Kingston in an e-mail.
“It should stop the fall in prices, but only if demand does not retreat further,” he said. “[The decreased output] was implemented by OPEC simply to try and balance supply and demand in a market where demand has been falling far more rapidly than anticipated.“
Though the goal in reducing output was to keep prices from falling even further, it is difficult to predict how prices will be affected, Kingston said.
“The decline in demand is essentially in charge of the market now, and it in turn is a function of the troubled global economy,” he said. “How much demand will fall is a key issue.“
While difficult to speculate, OPEC’s behavior should suggest more low prices at the gas pump for consumers, at least through the winter, said California Energy Commission spokesperson Susanne Garfield.
“Demand has been on a downward trend and supplies are good,” she said. “When you have ample supply the price can stabilize.“
In addition, the seasons generally play a role in fluctuating gas prices. During the winter, oil refineries use less of the costlier blending components commonly used in summer blends to keep burning temperatures lower, Garfield said.
“Winter is a lower demand season,” Garfield said. “As we move into the spring prices will probably move back up.“
Another factor which determines gas prices in California, which are usually more expensive than elsewhere in the United States, is the specific blend of gasoline used and produced in California, she said.
In fact, California imports only about 10 percent of its supply, which is used as blending components, while the rest comes from local refineries, Garfield added.
“There are just 13 refineries in California which produce the California Air Resources Board certified oxygenate blending gasoline, which is more costly to produce,” she said.
While prices have been on a downward shift, consumers are still encouraged to shop around for the best bargains, Garfield said.
“Continue to do the same things you did when it was $4.50 a gallon,” she said. “All the usual tips; keep your tires inflated properly, don’t carry extra weight and keep under the speed limit because you lose a lot of efficiency the faster you go.“
AARON BRUNER can be reached at firstname.lastname@example.org.