Global Economy

AAA Fuel Gauge Report | June 25, 2012

(WASHINGTON, June 25, 2012) Today’s national average price for a gallon of regular self-serve gasoline is $3.41.  This is ten cents cheaper than the price one week ago, 24 cents cheaper than one month ago, 18 cents cheaper than one year ago, and 53 cents cheaper than the year-to-date peak price of $3.94 in early April.  The national average price at the pump has now dropped 13 days in a row and 68 of the previous 70 days.  The nationwide average price has not been this low since January 28, 2012, almost five months ago.

As prices continue their steady descent around the country, drivers in South Carolina are the first to break below the $3.00 mark with today’s price of $2.99.  In addition, crude oil prices last week broke another barrier by reaching a settlement price below $80 per barrel for the first time since October 2011.  Prices remained below that level today finishing at $79.21 at the conclusion of formal trading on the NYMEX. 

Concern about the global economy, particularly the sovereign debt crisis in Europe and a slowdown in growth in large emerging market economies such as Brazil, India, and China, continues to act as a drag on expectations for future oil demand, putting downward pressure on prices. 

A stronger dollar relative to other currencies reduces oil prices in the U.S., as oil is traded in dollars.  The Federal Reserve Board of Governors last week decided against an additional round of quantitative easing, which has helped boost the value of the dollar. The central bank also revised downward its short and medium-term projections of both inflation and economic growth, adding additional strength to the dollar as well as reducing demand expectations. 

While prices are lower this week, they continue to reflect an implicit risk premium associated with geopolitical instability in the Middle East and North Africa.  Traders continue to be concerned about potential supply disruptions should the violence in Syria spread to neighboring countries, or should the political transitions in Egypt or Libya impact the global supply chain.

Consumers are reaping the benefits of the recent steady decline in gas prices as we enter the middle of the summer driving season. AAA predicts that lower gas prices will help motivate a record number of Americans to travel next week for the July 4 holiday.  AAA projects 42.3 million Americans will journey 50 miles or more from home during the Independence Day holiday weekend, a 4.9 percent increase over the 40.3 million people who traveled last year.  The expected 2012 Independence Day holiday travel volume will tie the past decade’s previous high mark set in 2007 and represent a near 42 percent increase from 2009.

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