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Lower demand brings down gas prices

By Kris Hundley, Times Staff Writer
In print: Thursday, July 24, 2008

Many gas stations in Miami posted prices under $4 a gallon Wednesday, but the Tampa metro area had the lowest average price in the state, $3.96, according to AAA.
	[Associated Press]

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ST. PETERSBURG — A week ago, Bob Lee's Tire Co. on Fourth Street N had some of the most expensive gas in the area: $4.14 a gallon for regular.

On Wednesday, the station's price was one of the lowest: $3.89 a gallon.

Though most gas stations in the Tampa Bay area aren't seeing swings that dramatic, prices at the pump are clearly headed down nationwide bringing welcome relief. Some observers think regular unleaded could drop to $3.75 or lower by end of summer.

"It's a little bit of positive news for a change," said Randy Bly, director of communications for AAA Auto Club South in Tampa.

On Wednesday, regular gas averaged $3.96 in the Tampa metro area, the lowest price in the state, according to AAA's Fuel Gauge Report. That's down about a nickel from an all-time high of $4.01 just a week earlier.

The turnaround in gas prices reflects a steep drop over the past three weeks in crude oil prices as the supply of gasoline has risen, thanks to weakening demand. On Wednesday, oil futures settled at $124.44, down more than $20 a barrel since July 3.

Whether it's a teenager cruising Clearwater Beach or a bureaucrat in Beijing, people are driving less than they were just weeks ago, whether by parental or government mandate.

Other factors creating a downward pressure on oil futures have been the slight strengthening of the dollar against the euro and Hurricane Dolly's track westward Wednesday, away from oil and natural gas platforms in the Gulf of Mexico.

"This market's still fundamentally quite strong — it's just that we've seen prices coming off from overinflated levels. The market's letting steam out," said Mark Pervan, a senior commodities strategist with ANZ Bank in Melbourne, Australia. "There's genuine reason to be taking profits in this market, with the weak U.S. demand numbers."

U.S. demand for gasoline over the four weeks ended July 18 was 2.4 percent lower than a year earlier, averaging more than 9.3-million barrels a day. That resulted in an increase in gasoline stockpiles of 2.9-million barrels. Analysts had expected an increase of half a million.

James Cordier, president of Liberty Trading Group in Tampa, said he's betting oil prices will continue to fall. After settling at a record $145.29 a barrel on July 3, crude prices could drop to $110 by year end, he said.

"The main catalyst has been China, which has taken huge steps to lower demand as well as clean air by taking 21-million cars off the road overnight," Cordier said, referring to a government mandate to curtail driving in advance of the Beijing Olympics. "That's been the tipping point."

James L. Williams, an oil analyst with WTRG Economics in London, Ark., said a bill in Congress to restrict oil speculators may have had a psychological impact on the commodities market.

"But now that people have seen prices drop, a lot of people are going to have second thoughts about being exposed to the futures market through index funds," he said. "That should take some of the upward pressure off the market."

An interim report issued Tuesday by the Commodity Futures Trading Commission and six other federal agencies said its research "does not support the hypothesis that the activity of these groups is driving prices higher."

Cordier, the commodities trader in Tampa, said he thinks declining crude prices could mean retail gasoline prices of $3.75 by Labor Day.

"And $3.50 a gallon is not out of the question," he said. Gas prices typically drop after summer vacations end and kids return to schools, though unforeseen situations — like hurricanes — could change that.

In St. Petersburg, Bob Lee's general manager, Todd Murrian, said he had no idea what was in store for gas prices.

"That's a frustrating thing for the public, the huge swings in price day to day," he said. "When I was at $4.14, the closest guy was at $4.08 — I must have bought on a high. Now that I'm the lowest, people are coming in."

Information from Times staff writer Dominick Tao and wire reports was used in this report. Kris Hundley can be reached at hundley@sptimes.com or (727) 892-2996.