Finally some relief at the pumps could be on the way

Posted Aug 31st 2006 3:50PM by Michael Fowlkes
Filed under: Forecasts, Good news, Rumors, Industry, Exxon Mobil (XOM)

It has definitely been a tough summer for Americans having to deal with record high oil prices and the effects they have caused at the pumps. Well, according to a report from USA Today we could be seeing gasoline prices dropping quite a bit over the next few months.

On Tuesday, AAA reported a nationwide average of $2.84 per gallon (the lowest since April 20). But Fred Rozell, gasoline analyst at the Oil Price Information Service, thinks that the national average could shrink to closer to $2 by the time we hit Thanksgiving. That would be a nice relief for consumers and auto manufacturers alike. Both have been struggling with the impacts of recent gasoline prices, which peaked this year at $3.036 Aug. 10th.

According to today's report, the downtrend can be attributed to three basic reasons:

The summer is almost over - This one is pretty straight forward... the less people drive the less we are going to have to pay at the pumps.
Weaker than expected demand growth - So far this year Americans have used 1.0% more gas than the first 8 months of last year. Typically we would expect to see usage climb by around 1.5%. I don't really find this too surprising. People just haven't been able to afford to spend as much at the pumps, and recent shifts towards smaller, less gas hungry vehicles have helped reduce the growth in demand.

Petroleum traders bailing out on their holdings - Nobody wants to be left holding their positions at the bottom. As oil has been on a tear most of the year, most traders feel that the prices have to reverse sooner or later. We have been seeing that happening lately with oil testing the psychological $70 support level lately (currently trading at $70.35 but hit a low today at $69.35).

While all of this is good news, this is not taking into account what could happen should we get nailed with another really strong hurricane or two this year. Last year gas hit $3.05 a week after Katrina hit the nation. But at least some relief is being felt.

I have to assume it all sort of depends on where you are living. I am curious to hear what our readers across the country are paying. Let us know where you live and what prices you are seeing at the pumps.

So far on Wall Street today:

ExxonMobil (XOM): -0.3% to $68.05 down $0.25
Chevron Corp (CVX): -0.7% to $64.76 down $0.43
BP Plc (BP): +0.3% to $68.03 up $0.21
Oil Service Holders Trust (OIH): +1.0% to $136.11 up $1.39

Michael Fowlkes has worked as a stock trader for 7 years and spent the last 2 years working as an analyst and portfolio manager for an online investment advisory service.

Tags: BP, Chevron, ExxonMobil, gas, gasoline prices, GasolinePrices

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Reader Comments (Page 1 of 1)

8-31-2006 @ 8:40PM

juan cecilio farrias said...

exxon and chevron are really fat in their reserves-and big cars are considered toys for the week end-The young generation is turned on to jap autos and cheap cars. and retired people was economy.The citys are getting bigger and swinging places are getting the young generation.It is cheaper to travel by plane than by car.The major interstate freeways one day may only see tractor trailer commerce and charted buses cuase people lease cars when they come to town and nobody wants to pay for a transmission job in the middle of a trip And if many go ontrips they share gas expense.Thanks to SUV's and minivans life is not to hard.The young generation use their heads the older ones refuse to convert therefor gas demand will dwindle.