Has the soaring price of gas finally peaked ?
Possibly. Crude oil prices sank Thursday, pushing the benchmark West Texas Intermediate crude down 9% to $99.80 a barrel on the New York Mercantile Exchange, the first time it has closed below $100 since mid-March.
“If these price levels stick, it’s great news for the consumer and it could mean we’ve seen the highs for 2011,” says Peter Beutel, president of energy risk manager Cameron Hanover. “There’s a 20 to 25% chance we’ve seen the high for the year.”
Beutel and other authorities say its unclear if the sell-off is more than a blip and can reverse 44 straight days of rising prices at the pump. Nationally, a gallon of unleaded regular now averages $3.99, up $1.07 from year-ago levels.
“Clearly, the falling price of crude oil is good news, although it’s too early to say that we’ve turned the tide,” says Nigel Gault, chief economist for IHS Global Insight. “If this sticks, it’s worth about 20 cents off the price at the pump.”
Even if crude oil prices stabilize at current levels, though, consumers are unlikely to see any immediate effect.
“Crude would have to stay around $100 for five to 10 days before we see gas prices come down,” says Darin Newsom, senior analyst at energy trader DTN. He expects seasonal demand to lift prices to as much as $4.20 a gallon, surpassing July 2008’s $4.11 record.
“Maybe (Thursday’s sell-off ) puts the brakes on the big increases we’ve been seeing. We’ll hold here for a while until the market figures out what signals (traders) were giving us today,” Newsom says.
Thursday’s plunge was part of a broader selloff of silver, gold and other commodities, which also pushed prices down on Wall Street. The dollar also rose, which helped push oil prices lower.
Falling U.S. inventories of gas, sustained unrest in Libya and oil-producing Middle East countries, increased overseas demand and fear of terrorist reprisals following Osama bin Laden’s death all could continue to prop up crude oil prices, says Naveen Agarwal, CEO of Pricelock, which helps businesses save on fuel costs. Agarwal expects a gallon of regular to peak at about $4.25 in early July before settling at about $3.80 in the fourth quarter.
Anthony Sabino, a former energy industry executive who teaches business at St. John’s University in New York, expects little relief soon, with gas prices ranging from $4.10 to $4.25 through Labor Day.
“We may be near the peak with respect to prices,” Sabino says, “but there’s no great wave of relief for consumers.”