Gas prices haven't done this in more than 2 years

OPIS expects gas prices to soon rise above year-ago levels.

  • By Myra P. Saefong,
  • MarketWatch
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Gasoline prices are poised to do something they have done in more than two years: climb above their year-ago levels.

"A long running streak for U.S. consumers is about to end," said Tom Kloza, global head of energy analysis at the Oil Price Information Service, in a note to clients. "The national U.S. average price of gasoline, as compiled by OPIS for AAA, will soon rise above the year-ago price."

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He pointed out that as of Friday, nationwide gasoline prices have been cheaper than year-ago levels for 831 consecutive days.

But thanks to some sharp decreases in late October of last year, which saw retail gas prices drop by more than a nickel from Oct. 21 to Oct. 26 in 2015, this year's average will likely eclipse last year's number by Sunday or Monday, Kloza said. He said the last time motorists paid more on average than the previous year was July 13, 2014.

On Friday, the average cost for a gallon or regular gasoline was $2.2295, compared with $2.236 on Oct. 21, 2015, according to data compiled by OPIS for AAA.

"Consumers are unique when it comes to gasoline. Some have an internal intuitive thermostat that recognizes when they are paying more than they did one year ago," Kloza told MarketWatch Friday. "It's probably one more factor that will make for an ornery American public after the election."

He expects October 2016 gasoline costs to be "about even" with October 2015, but November will "clearly be more expensive year-on-year," he said.

"We think this year will see total gasoline expenses of just under $300 billion," said Kloza. Next year will be slightly more expensive, but still cheap when viewed against 2011-2014."

There's also a possibility that monthly averages for motor fuel in October 2016 will exceed average monthly prices from a year earlier, he said.

The month-to-date average price for gasoline is at $2.2421 a gallon, compared with the average Oct. 2015 price of $2.261 gal, according to OPIS data.

"Throw in a slight demand uptick, and this month may be a more expensive month than [a] year ago, something not witnessed since spring 2014," said Kloza.

The potential "eclipse" for gas prices come on the heels of higher prices for West Texas Intermediate crude which are about $5.40 a barrel higher than they were a year ago. And oil prices may rise even more between now and the Nov. 30 meeting of the Organization of the Petroleum Exporting Countries, he said. OPEC is expected to complete a deal to curb output.

Gasoline "cracks" are wider as well, said Kloza, referring to the differences between wholesale petroleum-product prices and crude-oil prices. Reformulated gasoline futures fetch a gross margin of about $12.80 a barrel compared with $8.59 a barrel in late October 2015, he said.

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