Crude oil tumbles 8 percent; points to low gas prices this fall

  • By Jonathan Fahey Associated Press
  • Monday, July 6, 2015 3:10pm
  • Business

NEW YORK — A slew of global economic and geopolitical factors are working to pummel the price of oil and set up U.S. drivers for very low gasoline prices later this year.

The price of U.S. crude dropped 7.7 percent Monday to close at $52.53 a barrel and is now down nearly 15 percent from the high for the year set on June 10.

Gasoline prices in the U.S. will likely slide somewhat from a national average of $2.77 over the next few weeks. Experts then expect a substantial decline in late summer and fall, pushing average gasoline prices in some low-price states below $2 a gallon again.

“We’re going back to some of those low numbers we saw over the winter,” said Tom Kloza, chief oil analyst at the Oil Price Information Service. “In some places (gas) prices starting with a 1 should come back by football season.”

There are several signs around the world that point to falling demand for crude and fuels at a time when supplies are high and possibly rising:

— The Greek financial crisis could slow economic activity in Europe, which would reduce demand for gasoline and diesel.

— China’s oil imports have already slipped this year and a plummeting Chinese stock market could mean even weaker demand in the world’s second largest oil consumer.

— Oil production in OPEC, driven by strong production from Saudi Arabia and Iraq, is helping to keep the world’s supplies high. OPEC’s June production rose for the fourth month in a row, to 31.3 million barrels per day, according to a report Monday from Platts. That’s 1.3 million barrels per day more than the cartel’s official target and the highest level since August of 2012.

— Iran is eager to begin exporting oil that has been held back by sanctions, and talks between the U.S. and Iran that could lift those sanctions appear to be progressing.

— U.S. oil production remained strong even after drillers slowed their activity in the face of low oil prices— and now some drillers are ramping up production again.

The financial turmoil in Greece and China is also strengthening the dollar, which tends to push down the price of oil because oil is priced in dollars around the world.

“All signs point south for oil prices,” wrote Thomas Pugh, commodities economist at Capital Economics, in a report Monday. Pugh reduced his forecast for oil prices at the end of this year by $5 to $50 a barrel.

After hitting a six-year low of $43.46 in mid-March, oil rose to nearly $60 in late April as refiners processed enormous amounts of crude for the summer driving season. Oil then stayed remarkably stable around $60 until the middle of last week.

Then some key trends reversed: U.S. supplies increased for the first time in two months and the number of rigs drilling for oil in the U.S. grew for the first time since December. Oil fell 5 percent last week. And over the weekend the Greece crisis worsened and the Iranian talks progressed, leading to a further drop Monday.

Pump prices are unlikely to drop sharply right away because driving season is in full swing and U.S. gasoline demand is higher than it’s been since 2007, Kloza said. But unless a hurricane disrupts gasoline production on the Gulf Coast or elsewhere, gasoline prices should begin to plunge later this summer as refiners switch to winter blends of fuel.

The national average of $2.77 is 89 cents below last year at this time, according to AAA. In the first six months of the year AAA calculates that U.S. drivers saved $65 billion in gasoline expenses compared with the first six months of 2014, or $530 for every U.S. household on average.

Lower gasoline prices will help save drivers an additional $46 billion through the rest of the year, Kloza calculates.

Talk to us

> Give us your news tips.

> Send us a letter to the editor.

> More Herald contact information.

More in Business

Black Press Media operates Sound Publishing, the largest community news organization in Washington State with dailies and community news outlets in Alaska.
Black Press Media concludes transition of ownership

Black Press Media, which operates Sound Publishing, completed its sale Monday (March 25), following the formerly announced corporate restructuring.

Maygen Hetherington, executive director of the Historic Downtown Snohomish Association, laughs during an interview in her office on Thursday, Feb. 15, 2024, in Snohomish, Washington. (Ryan Berry / The Herald)
Maygen Hetherington: tireless advocate for the city of Snohomish

Historic Downtown Snohomish Association receives the Opportunity Lives Here award from Economic Alliance.

FILE - Washington Secretary of State Steve Hobbs poses in front of photos of the 15 people who previously held the office on Nov. 22, 2021, after he was sworn in at the Capitol in Olympia, Wash. Hobbs faces several challengers as he runs for election to the office he was appointed to last fall. (AP Photo/Ted S. Warren, File)
Secretary of State Steve Hobbs: ‘I wanted to serve my country’

Hobbs, a former Lake Stevens senator, is the recipient of the Henry M. Jackson Award from Economic Alliance Snohomish County.

Mark Duffy poses for a photo in his office at the Mountain Pacific Bank headquarters on Wednesday, Feb. 14, 2024 in Everett, Washington. (Annie Barker / The Herald)
Mark Duffy: Building a hometown bank; giving kids an opportunity

Mountain Pacific Bank’s founder is the recipient of the Fluke Award from Economic Alliance Snohomish County.

Barb Tolbert poses for a photo at Silver Scoop Ice Cream on Thursday, Feb. 29, 2024 in Arlington, Washington. (Annie Barker / The Herald)
Barb Tolbert: Former mayor piloted Arlington out of economic brink

Tolbert won the Elson S. Floyd Award, honoring a leader who has “created lasting opportunities” for the underserved.

Photo provided by 
Economic Alliance
Economic Alliance presented one of the Washington Rising Stem Awards to Katie Larios, a senior at Mountlake Terrace High School.
Mountlake Terrace High School senior wins state STEM award

Katie Larios was honored at an Economic Alliance gathering: “A champion for other young women of color in STEM.”

The Westwood Rainier is one of the seven ships in the Westwood line. The ships serve ports in the Pacific Northwest and Northeast Asia. (Photo provided by Swire Shipping)
Westwood Shipping Lines, an Everett mainstay, has new name

The four green-hulled Westwood vessels will keep their names, but the ships will display the Swire Shipping flag.

A Keyport ship docked at Lake Union in Seattle in June 2018. The ship spends most of the year in Alaska harvesting Golden King crab in the Bering Sea. During the summer it ties up for maintenance and repairs at Lake Union. (Keyport LLC)
In crabbers’ turbulent moment, Edmonds seafood processor ‘saved our season’

When a processing plant in Alaska closed, Edmonds-based business Keyport stepped up to solve a “no-win situation.”

Angela Harris, Executive Director of the Port of Edmonds, stands at the port’s marina on Wednesday, Jan. 24, 2024, in Edmonds, Washington. (Ryan Berry / The Herald)
Leadership, love for the Port of Edmonds got exec the job

Shoring up an aging seawall is the first order of business for Angela Harris, the first woman to lead the Edmonds port.

The Cascade Warbirds fly over Naval Station Everett. (Sue Misao / The Herald file)
Bothell High School senior awarded $2,500 to keep on flying

Cascade Warbirds scholarship helps students 16-21 continue flight training and earn a private pilot’s certificate.

Rachel Gardner, the owner of Musicology Co., a new music boutique record store on Thursday, Jan. 18, 2024 in Edmonds, Washington. Musicology Co. will open in February, selling used and new vinyl, CDs and other music-related merchandise. (Olivia Vanni / The Herald)
New Edmonds record shop intends to be a ‘destination for every musician’

Rachel Gardner opened Musicology Co. this month, filling a record store gap in Edmonds.

MyMyToyStore.com owner Tom Harrison at his brick and mortar storefront on Tuesday, Sept. 6, 2022 in Everett, Washington. (Olivia Vanni / The Herald)
Burst pipe permanently closes downtown Everett toy store

After a pipe flooded the store, MyMyToystore in downtown Everett closed. Owner Tom Harrison is already on to his next venture.

Support local journalism

If you value local news, make a gift now to support the trusted journalism you get in The Daily Herald. Donations processed in this system are not tax deductible.