Pump Prices Weaken for 4th Straight Week

Phoenix, Ariz., July 31, 2008 – Across the state and country, prices at the pump are moving further away from the $4 per gallon mark as gasoline prices fall for the fourth consecutive week. Statewide, drivers are currently paying an average of $3.911 for a gallon of regular unleaded gasoline, a drop of 8.6 cents from last week. Tucson drivers continue to hold the state’s lowest fuel price at $3.740 per gallon, while Flagstaff drivers continue to pay the most to fill their tanks at $4.141 per gallon. Nationwide, the current average is $3.909 per gallon, a drop of nearly 12 cents from last week.  

With crude oil continuing to back away from its all-time high of $147 per barrel, many motorists are wondering if the relief they have experienced at the pump over the last few weeks is here to stay. As a result, this week, AAA Arizona would like to answer some commonly asked fuel questions:

Now that prices are under $4 per gallon, will motorists revert back to their old driving habits?
While pump prices have fallen by over 17 cents in the last month, motorists are still paying $1.13 more per gallon than they were this time last year. Last week, the Department of Energy revealed a 2.4 percent drop in demand over the same week last year. This week, the agency reported that demand still remained significantly lower than the same time period last year. So while fuel prices have fallen below the $4 mark, the cost of a gallon of regular unleaded gasoline is still continuing to strain household budgets. 

Will weather be a factor in gas prices as the summer approaches its end?
Although weather has not played a role in fuel prices so far this summer, it is important to keep in mind that we are in the middle of hurricane season. In fact, hurricane season does not end until the end of November. Tropical storms and/or hurricanes that pose a threat to oil infrastructure can result in increased crude and therefore gasoline prices. If there is little to no damage caused by a storm or hurricane, the price increase is generally temporary. However, if significant damage is sustained and output is suspended post storm or hurricane, the price increase could be more severe and last much longer.   

How much can we expect prices to drop?
Barring unforeseen circumstances, it is likely that prices will drop an additional 15-20 cents into the $3.75 range over the next month leading up to the Labor Day holiday.  

Will we see $3 per gallon again? Why or why not?
It is possible that we could see $3 a gallon, but it is not probable in the short-term. While crude oil has backed down significantly from its record-high established earlier this month, it is still trading at nearly double what it was this time last year. Because crude oil makes up well over half of the cost of a gallon of gasoline, it would have to fall well under the $100 per barrel mark (and stay there) before $3 per gallon fuel resurfaces.

When will prices go back up?
In the current environment, it is likely that pump prices will continue to retreat for the next several weeks. The next up tick in pump prices will likely come with Labor Day weekend, as motorists’ fuel up to hit the road for the last summer holiday of 2008. However, it is important to note that the market remains volatile. A primary example of this is this week’s Department of Energy report, which revealed a drop in both crude and gasoline stockpiles and in turn, resulted in a $4 increase in crude oil. Crude has since retreated to the low $120 per barrel range, but it is important to remember that we could very easily experience a reversal in pump prices should there be a change in direction of crude prices.

The cheapest gasoline in the continental United States is in Oklahoma, where unleaded regular is $3.636 per gallon. California drivers are paying the most for fuel in the country at $4.266 per gallon.

Motorists can visit www.AAAAZ.com/news/fuelnews.htm for fuel price information and gas saving tips or go to www.AAA.com/fuelfinder to locate the station with the cheapest gas in their neighborhood. They can also visit AAA’s Fuel Cost Calculator at www.fuelcostcalculator.com, which can help drivers plan out their fuel costs so they can budget their travel expenses in advance.

From now through September 30, drivers can also go to www.aaa.com/sweepstakes, visit a local AAA office or call 1.866.298.1232 to request a new insurance quote from AAA to receive a $10 gas card from AAA Insurance and be entered into the grand prize drawing of $20,000 in free gas. Those requesting a quote will also be entered into a monthly drawing to win $1,000 in free gas.

*The BTU-adjusted price of E-85 is the nationwide average price of E-85 adjusted to reflect the lower energy content as expressed in British Thermal Units - and hence miles per gallon - available in a gallon of E-85 as compared to the same volume of conventional gasoline. The BTU-adjusted price calculated by OPIS and AAA is not an actual retail average price paid by consumers. It is calculated and displayed as part of AAA's Fuel Gauge Report because according to the Energy Information Administration E-85 delivers approximately 25 percent fewer BTUs by volume than conventional gasoline. Because "flexible fuel" vehicles can operate on conventional fuel and E-85, the BTU-adjusted price of E-85 is essential to understanding the cost implications of each fuel choice for consumers.

AAA Arizona’s Weekly Fuel Gauge includes data from gasoline stations in every Arizona community. However, only major metropolitan areas are shown in the table above.  Local prices in some communities might be higher or lower than the averages shown here.

NOTE: AAA Fuel Gauge data may be used on a daily basis by news media Web sites, but should include attribution to AAA.