Gas Prices Could Soon Bottom Out
Motorists have been spending much less on gas in recent months, but those declining prices could bottom out over the next 10 days.
"If you look at the market, it's saying that we're going to drop to where, perhaps by March or so, we're only going to pay for taxes for the gas and it's going to be free," said Tom Kloza, global head of energy analysis at the Oil Price Information Service. "We saw crude oil go below $50 a barrel, we have 37 states, including New Jersey, that have common prices under $2 a gallon. So, we're certainly going to see lower numbers through the end of this week, but at some point, it'll end and the market will bounce higher with the expectation of spring. I expect that end will come in the next 10 days."
Gasoline tends to be less expensive during the winter months. Fuel is easier to manufacture and in January, people drive a lot less. The market anticipates the change in the spring as maintenance is done at refineries, people drive more and prices go up as a result.
"It's a question of do we bottom this week, do we bottom next week or is this a black swan where we don't bottom at all and we continue lower for the rest of the year? I don't think that's going to happen," Kloza said. "We have to see a bottom because the alternative is to actually have free oil and free gasoline, so we will bottom. It's coming a little later this year, but it will come."
Generally, gas prices bottom out in November or December. The average price in New Jersey right now is $2.21 a gallon and some gas stations have prices in the $1.80 to $1.90 range. Nationally, there are gas stations in some states that are in the $1.60 range.
Kloza still is predicting that prices will remain lower this year than they have been in previous years. In fact, Americans are expected to spend $115 billion dollars less on fuel in 2015 than in 2014.
"It's going to be a very cheap year compared to previous ones. When prices rally, they may move up 30 or 40 cents, but at this point, if we saw a 40-cent rally, that would put us at $2.25 a gallon or so and that's a number that most people would find very tolerable," he said.
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