Gasoline is cheaper now than a year ago — and could fall below $3
A Sheetz customer gets gasoline at a gas station in Plains, Pennsylvania, U.S. October 19, 2022.
Aimee Dilger | Reuters
Gasoline prices are now cheaper across the U.S. than they were a year ago, and the price per gallon could fall below $3 for most Americans by the end of the year.
According to AAA, the national average for a gallon of unleaded gasoline was $3.329 on Thursday, below the $3.343 a year ago, before Russia’s invasion of Ukraine. Unleaded gasoline was at a record $5.01 per gallon June 14 and stayed high through the summer and fall.
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Gas prices fell 15 cents per gallon in the past week and are down from $3.80 a gallon a month ago.
“For the next 55 days, it looks good for consumers but ugly for refiners,” said Tom Kloza, global head of energy analysis and co-founder of OPIS, formerly Oil Price Information Service. “They’re running refineries so hard because of the diesel shortage that they’re making too much gasoline. We’re running about 7% behind last year in terms of demand.”
Kloza expects to see gasoline below $3 a gallon for most Americans, before prices start to tick back up when refiners begin to produce summer blends in February. “You just can’t run refineries at these high rates and make too much gasoline for the summer because there’s no place to put it. I think we see the lowest prices of 2023 in the next 55 days,” he said.
Patrick De Haan, head of petroleum analysis at GasBuddy, expects the national average will fall below $3 a gallon by Christmas, barring an event that drives oil prices higher. Even with OPEC+ reaffirming a 2 million barrel a day production cut this past week, oil prices have still fallen.
West Texas Intermediate oil futures were trading at $73.81 a barrel Thursday morning and are down 1.9% for the year so far. De Haan said a wild card for oil is the timing of the reopening of the Chinese economy, after Covid shutdowns. That would push demand sharply higher for oil and other commodities.
But for now, gasoline prices are in decline.
“$2.99 looks like a pretty strong shoe-in at this point. The question is if it’s going to be at 11 p.m. on the 23rd or 11 a.m. on the 24th,” De Haan said. Gasoline prices are wide ranging by region, with the average at $4.66 per gallon in California but already below $3 per gallon in some states, including Texas, Louisiana, Tennessee, Georgia, Mississippi, Arkansas and Alabama.
De Haan said the price could drop as low a $2.75 per gallon before it begins to rise again later in the winter. Refinery utilization was more than 95% last week, an unusually high level for this time of year, he added.
“Gasoline inventories saw a massive build. That’s probably going to provide refiners a little bit of ammunition to slow things down,” De Haan said.
Kloza said the U.S. currently has 26 days of supply, more than ample with the decline in demand to a four-week average of 8.4 million barrels a day.
Diesel inventories have also been growing and that could help drive down prices. The average price for diesel was $5.00 per gallon, down from $5.81 in June. Diesel is in short supply globally because Russia was a large oil and fuel exporter to Europe. As a result, diesel’s price decline has been much shallower, and its price is far from the average $3.61 a gallon it was a year ago.
Before the invasion of Ukraine, Russia exported 2.4 million barrels a day of refined petroleum products, including more than 1.1 million barrels a day of diesel exports, according to Bank of America. About half of the refined products went to Europe.
De Haan expects diesel could eventually drop below $4. “I think diesel could fall into the $3s,” he said. “That’s the bigger factor right now in inflation. ... Gasoline is now lower than its year ago level. Gasoline has been deflationary. Diesel could drop another $1 to $1.50 a gallon,” he said.
Chevron beat third-quarter earnings and revenue expectations, returning a record amount of cash to shareholders.
Shares were up 2.6% in the premarket following the report’s release.
The oil major’s quarterly profit, however, declined substantially compared to the year-ago period due to lower margins on refined product sales, lower prices and the absence of favorable tax times.
Chevron is aiming to streamline its portfolio, with asset sales in Canada, Congo and Alaska expected to close in the fourth quarter of 2024. The company is also target $2 billion to $3 billion in cost reductions from 2024 through the end of 2026.
Here is what Chevron reported for the third quarter compared with what Wall Street was expecting, based on a survey of analysts by LSEG:
- Earnings per share: $2.51 adjusted, vs. $2.43 expected
- Revenue: $50.67 billion, vs. $48.99 billion expected
Chevron’s net income came in at $4.49 billion, or $2.48 per share, down 31% from $6.53 billion, or $3.48 per share, in the third quarter of 2023. When adjusted for foreign currency impacts, the company reported earnings of $2.51 per share, solidly topping Wall Street’s expectations for the quarter.
Chevron booked revenues of $50.67 billion, also beating Street expectations but declining 6% from the $54.1 billion reported in the third quarter last year.
The oil major returned a record $7.7 billion to shareholders in the quarter, including $4.7 billion in share buybacks and $2.9 billion in dividends.
Chevron produced 3.36 million oil-equivalent barrels per day in the quarter, a 7% increase over the third quarter of 2023, driven by record output in the Permian Basin.
Chevron’s stock is largely flat for the year, underperforming the S&P 500 energy sector which has gained more than 6%. Shares have struggled to gain ground as uncertainty looms over the company’s pending $53 billion acquisition of Hess.
The Federal Trade Commission has cleared the deal, though it prohibited John Hess from joining Chevron’s board.
Chevron remains locked in a dispute with Exxon Mobil, which is claiming a right of first refusal over Hess Corp.’s lucrative oil assets in Guyana. If an arbitration court rules in Exxon’s favor, Chevron’s acquisition of Hess would fail to close.
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