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Will it be wild ride on gas-price cycle?

National summer average forecast at $3.57 a gallon

Drivers around the country might get the slightest of breaks on gasoline prices this summer.

But it’s anyone’s guess whether Hoosiers will enjoy the same drop in prices forecast for other areas.

The Energy Department predicts the national average price to drop 1 cent to $3.57 a gallon between April and September.

Those are the months when Americans do most of their driving.

It would also be the lowest average summer price since 2010.

Indiana – and the Midwest in general – has been known to have some wonky spikes in gas prices, though.

Take last summer: On one day in August, city gas prices surged 34 cents – the nation’s highest up to that point during 2013.

Patrick DeHaan, senior petroleum analyst for GasBuddy.com, said this is because of something called “price cycling.”

“That phenomenon only takes place in the Great Lakes,” he said.

Price cycling, according to DeHaan, is when a chain of stations has significant price power over others.

That chain will set a price that other chains will follow. The original price at the original chain then drops lower and lower, with the other chains following suit.

Finally, the original chain will mark down the price to the point where its margins are suffering, then raise the price to make up for those margins.

And the other chains then follow suit.

It’s been happening since around 2000, according to DeHaan.

“It’s maybe more noticeable as gas prices climbed into the 2s, 3s or 4s (dollars per gallon),” DeHaan said.

As of Friday, the average gallon of gas in Fort Wayne cost $3.69, down from $3.72 Thursday, according to GasBuddy.com.

The national average, which was trending downward, was $3.59.

Indiana is typically above the national average due to its high gas taxes, DeHaan said.

For the year, the department’s Energy Information Administration expects gasoline to average $3.45 a gallon, down from $3.51 last year and also the lowest since 2010.

World demand for oil is growing, but supplies are growing faster than demand, thanks to higher production in the U.S., Canada and elsewhere.

That will help keep a lid on the price of crude oil and gasoline.

The price of Brent crude oil, a classification benchmark used around the world and the most important factor in gasoline prices, is forecast to fall 4 percent this year. U.S. drivers are expected to burn slightly more gasoline than they did last year, according to the EIA.

More people will drive more miles as the economy continues to improve, but they are driving more fuel-efficient cars.

That will prevent gasoline demand from rising as fast as the number of miles driven. EIA Administrator Adam Sieminski warned in a conference call with reporters Tuesday that unexpected factors such as refinery outages, pipeline problems or geopolitical events that disrupt crude flows could send prices quickly higher.

The sudden return of supplies could also send prices lower. The average price of gasoline last summer was 5 cents lower than what EIA had forecast last spring.

Sieminski said that the amount of oil kept out of the market because of political unrest and logistical factors around the world is far higher now than in the past.

Turmoil in Libya, Sudan and elsewhere is keeping about 2.5 million barrels of oil a day off the market, about 3 percent of world demand, up from 500,000 barrels historically, he said.

That has kept the price of Brent crude higher than anticipated in recent months, and it has led to slightly higher gasoline prices than forecast.

The average price of gasoline in the U.S. was $3.59 a gallon Tuesday, the same as last year at this time, according to AAA, the Oil Price Information Service and Wright Express.

It has risen steadily since it was $3.27 in early February, as it does almost every late winter and early spring while refiners shut down plants for annual maintenance and switch to more expensive summer blends of gasoline designed to meet clean-air standards. Tom Kloza, chief oil analyst at OPIS and GasBuddy.com, predicts gasoline will continue to rise slightly until it peaks at about $3.65 a gallon in late April, then drift lower.

That would make for an annual peak lower than last year’s $3.79 a gallon and 2012’s $3.94 a gallon.

jeffwiehe@jg.net

The Associated Press contributed to this story.

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