Gas prices decline despite Sandy; average may dip to $3.25 by Thanksgiving
AAA expects prices to continue to drop throughout the year, even well after the storm's brunt.
We’re used to seeing gas prices spike when a natural disaster such as Sandy creates the kind of damage seen in the Northeast last week. Yet as of Monday, the national average retail price of gasoline stood at $3.47 a gallon, below $3.50 a gallon for the first time since July 31, according to AAA.
“This is the fourth day in a row the national average has been under $3.50,” AAA spokesman Michael Green said to MSN Autos.
The drop may seem incongruous with images of long lines at gas stations in New York and New Jersey, and with stalled refineries and tanker terminals still undergoing cleanup in and around the New York metro area. But the storm also prevented a lot of people from driving because of bad weather, downed trees and other debris on roads, which cut demand for gas and helped drive down prices. That trend will continue, Green said.
“Demand is down in the Northeast because a lot of people stayed home during the storm,” he said. “And a lot of people are still not driving, whether their offices don’t have power or some people are taking the recommendation to stay off the road till the situation is cleared. From what we understand, the streets of New York are still relatively empty at this point.”
It’s also all about the location of refineries, Green noted.
“The Northeast is a major consumer of gasoline rather than a producer,” he said. “So when a storm like Hurricane Katrina hits the Gulf Coast or even the smaller hurricanes we saw earlier this year, it raises gas prices nationally because 25 percent of our refining capacity is along the Gulf Coast. In the Northeast, there are areas where gasoline is produced, but it’s a relatively small percentage of the amount that’s used.”
With overall demand for gasoline down in the Northeast and the rest of the country, as is typical for this time of year, AAA expects gas prices to continue to decline throughout 2012. “The price of gasoline nationally will be between $3.25 and $3.40 a gallon by Thanksgiving,” he said, “and prices will continue to drop through the end of the year.”
Tell that to the people hard hit by Sandy who have been waiting in long lines at gas stations just to buy a few gallons -- if they can even find a station that’s open. While there have been reports of price gouging, gas prices have risen on average about 10 cents in the areas of New York and New Jersey most affected by the storm.
“We are seeing what we believe are temporary price increases in areas that were directly affected by the storm, such as northern New Jersey, New York City and Long Island,” Green said. “Gas prices are rising there because there’s a shortage of gas stations that are open because they don’t have power. But once those stations have power and the long lines and supply issues diminish, we expect prices to drop there as well.”
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