Experts say drop in gas prices shows supply, demand at work
September 9, 2006
Prices for gasoline and crude oil continued their late-summer swoon this week.
Cheltenham resident Jim Barber is thrilled that gasoline prices are down, but their quick decline makes him suspicious that the oil industry can take advantage of consumers at will by jacking prices up.
"They have problems up in the North Slope with BP, relatively poor relations with Venezuela, trouble in Nigeria and Iraq, and, with all these problems we're having... it amazes me how the price of petroleum is going down," he said yesterday.
Experts said consumers are witnessing supply and demand at work. Inventories of crude oil and petroleum products usually fall substantially from Memorial Day through Labor Day - the heavy summer driving season, according to The Schork Report, an energy-industry newsletter in Villanova. This year, producers and distributors boosted inventories to fend off supply disruptions.
The results of ample supplies are showing at the pump.
AAA Mid-Atlantic yesterday reported an average price of $2.80 a gallon for Philadelphia and the four adjacent Pennsylvania counties, down 10 cents from a week ago and 36 cents from last month. The average in South Jersey was $2.55, down 12 cents and 41 cents over the same periods.
Crude oil for October delivery fell to $66.25 a barrel, a five-month low for the near-month future on the New York Mercantile Exchange.
The decrease in crude-oil and gasoline prices was not expected on Aug. 7 when BP shut the biggest U.S. oil field at Prudhoe Bay in Alaska. Analysts predicted gasoline prices would jump by 10 cents. Instead, they fell as BP restored half the production and other sources made up for the lost supplies.
Even with lower gasoline prices - filling a 20-gallon tank cost about $8 less than it did four weeks ago - Barber has not gone back to his old ways of driving.
He said he does not drive the 20 miles out to the King of Prussia malls nearly as much.
"My wife and I, a couple of times a month, might drive out to a movie. I find myself thinking over driving out there," he said.
Contact staff writer Harold Brubaker at 215-854-4651 or hbrubaker@phillynews.com.