Gas prices hit a four-year low nationally and locally on Monday, with a handful of Greeley stores selling gas for $2.99 a gallon.
Greeley’s prices are roughly 70 cents lower than they were in June, falling more than the rest of the nation. But the average Greeley gas price Monday was $3.11, 8 cents above the national average.
Most stations in Greeley hovered around the $3 mark, as an increased international supply did not meet an equally exuberant international demand.
“For now, this is like a mini-bonus,” said Rayola Dougher, a senior economic adviser with the American Petroleum Institute in Washington, D.C.
According to GasBuddy.com, 19 states across the country had average prices below $3 a gallon, the lowest being in Chattanooga, Tenn., where the average was $2.66 on Monday. Colorado’s average held strong at $3.09 per gallon.
Stores throughout the Front Range had already been seeing some prices below $3, said Wave Dreher of AAA Colorado.
“I think we should enjoy it while it’s below $3,” Dreher said. “It probably will creep up again. A lot of things are happening now. Both international and domestic supplies are high, but because we started the winter season, demand is down, and demand is down internationally.
“So we’re seeing some nice things happening at the pump, but it’s probably something we shouldn’t count on long-term.”
Gas Buddy.com reported in a news release that of more than 133,000 gas stations surveyed, “the tipping point in this year’s autumn price decline was reached over the weekend when the number of stations selling gas below $3 climbed to 50 percent of all retailers across the U.S. The last time 50 percent of the nation’s fuel retailers were priced below $3 was Dec. 28, 2010.”
Gasoline prices are based on the international prices of crude, which have sunk in recent weeks to about $80 per barrel. If the savings stuck around for a year, it would save each American household $350 at the pump, Dougher said.
Had the U.S. not experienced the shale drilling boom it’s now seeing, especially in places like Texas, Colorado and North Dakota, prices would be much higher, Dougher said. In fact, she said she heard energy officials say that without the U.S. shale revolution, crude prices could have swelled to $150 a barrel.
“If you had $150 crude prices, you’d have gas prices near $5 a gallon now,” Dougher said.
Crude prices in many ways dictate the amount of drilling producers take on. Though much of their drilling is hedged on prices that are locked in, drillers always leave a little room for higher prices in higher demand months.
But it’s a price watched closely.
“We’re still in very good shape in the U.S.,” Dougher said. “I’m sure drillers are probably concerned now about how low prices are going, but we’re still in a wonderful place in terms of bringing product to market, and we can do even more in the future.”
Ryan Smith, senior energy analyst Bentek Energy in Denver, said prices are not even close to crisis levels.
“We’re at $80 and we don’t see a huge impact,” Smith said. “Prices would have to get significantly lower, like at $60-$70 for (West Texas Intermediate, one of two major U.S. crude exchanges), to really have a significant impact on drilling operations. It will impact some returns, definitely. If prices stay at this level, they won’t be earning what they did last year.”
Though there’s no real way of predicting, Dougher said if prices stayed below $3 for a long period of time, drillers would cut back production, which could be disastrous to a growing economy.
“You don’t want that to remain too deep and too low for too long,” Dougher said. “The oil and gas industry has been the biggest source of strength in our economy. If this goes on too much longer, companies would have to scale back on production. There will be fewer jobs, and you have less tax revenues and less economic growth, so you have a ripple effect.”
Patrick DeHaan, senior petroleum analyst with GasBuddy.com, said he foresees lower gas prices through the end of the year. Typically, lower winter prices don’t last too long. As an example, DeHaan said, Colorado’s average price on Dec. 4, 2012 was $3.40. It went down to $2.80 by Feb. 3, then back up to $3.55 a month later.
“Colorado could get close to that $2.80 level,” DeHaan said. “Of course, it will take quite a bit of time. I’d say lower prices would remain at levels longer than that window you saw between January and late January of 2012. I’m expecting prices to go back up again in late winter, like they always do. They may not go up as high as they have, but we’re still expecting a recovery.”
Dougher said global demand should remain high in the coming years, which will likely drive prices back up.
“We’ll continue to need more oil in the world market for many decades to come and the U.S. has been a leader in bringing on more and more crude,” Dougher said. “We gained a lot of market share of the world market for crude, but that was primarily because of political instability.”