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Four reasons why gas prices will continue to plunge

 

When San Diego's retail gas prices peaked at $4.72 a gallon
on October 8, the average price of wholesale gasoline was 
$1.00 more per gallon than it is today. 
 
But even though the wholesale price has dropped by $1.00 on 
average, today's retail price is $4.31 - a drop of only 41¢.
 
In other words, wholesale prices have dropped at a rate of
about 4¢ a day while retail prices have only dropped 2¢ a day.
In the last week, retail prices dropped by 25 cents, or at a rate 
of 3.6¢ a day, so retailers are catching up on their discounting 
as prices drop, but there is still a lag, and the retailers are 
catching up. 
 
There are four reasons why gas prices are plunging: 
 
1)  HUGE BUILD IN OIL INVENTORIES - Crude losses extended to a 
    fifth straight NYMEX session and tallied just shy of $5.50/bbl, 
    or a 7% drop in a week's time as of Wednesday. The front-month
    U.S. crude contract has come under pressure as country-wide 
    inventories continue to expand each week
 
2)  GASOLINE DEMAND AT SEVEN MONTH LOW. The Department of 
     Energy is reporting the lowest demand figures since March 16.
 
3)  HUGE BUILD IN CA GASOLINE SUPPLIES -- statistics released 
    yesterday by the California Energy Commission show that 
    California blend gasoline stocks increased by nearly a
    million barrels to 5.781 million barrels last week.
 
4)  FEAR - the public, political, and law enforcement outcry 
    over the sudden record breaking price spike has made the 
    refineries nervous. There were excuses, but not good reasons
    for the so-called "perfect storm" in gas prices that resulted
    in the highest inflation-adjusted fuel prices in california
    in the last 94 years. And with the first three factors in play
    above, California refiners should be nervous. 
 
BOTTOM LINE:  Gas prices will continue to plunge at a rate of at
least a penny a day, perhaps as much as three cents a day.