DALLAS (Bloomberg) — Gasoline pump prices are poised to drop by year end, if history is any guide, as refineries resume production, Europe exports more fuel to the East Coast and Americans drive less.
Prices at service stations may fall about 6.3 percent to $3.54 a gallon, according to eight years of seasonal data compiled by Bloomberg. Gasoline deliveries to the United States from Europe may rise 35 percent, according to the median of eight estimates in a Bloomberg News survey. Demand has declined an average of 3.6 percent from July through December during the past five years, Energy Department data show.
While prices usually drop during the third quarter, this year is different because plants on the East Coast and in the Virgin Islands were permanently shut, reducing supply. Pump prices rose as high as $3.871 a gallon last month, a record for the period, AAA data compiled by Bloomberg show, feeding the perception that President Barack Obama won’t do as well as Republican challenger Mitt Romney in lowering prices, according to a Bloomberg poll.
“The market is expecting the return of supply as we go through the course of October and the refineries in Europe get through their maintenance period,” Andy Lipow, president of Lipow Oil Associates in Houston, said by phone. “Between now and the election, prices will fall moderately, 10 to 15 cents a gallon, but they won’t have much of an impact on the election.”
Production is so constrained that any surprise can lead to magnified market moves. An explosion at Irving Oil Corp.’s plant in Saint John, New Brunswick, on Sept. 26 that did no damage to the main part of the refinery, sent gasoline up 2.3 percent in 10 minutes on the New York Mercantile Exchange.
Gasoline for October delivery surged 19.77 cents, or 6.3 percent, to $3.342 a gallon Sept. 28, its last day of trading, capping a 23 percent gain since June, the largest third-quarter increase since 2005 when Hurricanes Katrina and Rita shut almost 30 percent of U.S. refining capacity. The November contract sank 5.09 cents, or 1.7 percent, to $2.8692 Tuesday.
Production and supply may rise as retail outlets switch to winter-grade fuel, which doesn’t have to meet as stringent emissions specifications and can be made from a wider variety of blendstocks, such as butane. Gasoline output has risen an average of 3.6 percent in the fourth quarter during the past five years.
“Towards October we should start to see some relief at the pump based on the rollover to the winter grade,” said Stephen Schork, president of the Schork Group Inc. in Villanova, Pa. Retail prices could fall 20 cents to between $3.50 and $3.60 a gallon, Schork said.
Prices ended last year at $3.278 a gallon, according to Heathrow, Florida-based AAA, the nation’s largest motoring organization
In a Bloomberg National Poll of 1,007 respondents conducted Sept. 21-24, 46 percent said Romney would do a better job controlling gasoline prices, compared with 39 percent for Obama.
Falling prices may remove gasoline as an issue for voters in the presidential election, said Andrew Lebow, senior vice president for energy at Jefferies Bache in New York.
“Are they going to make their decision based on gasoline prices?” said Lebow. “Not at $3.70 or $3.80. Maybe if they’re above $4, they might be another factor to sway undecided voters.”
Prices rose as the largest refineries in Canada and Europe underwent maintenance, along with another plant in Wales that ships gasoline to the U.S. In the Mid-Atlantic area, which includes New York Harbor, the delivery point for Nymex futures, inventories are at the lowest point since the Energy Department began releasing weekly data in 1990.
While Americans purchased 3.8 percent less gasoline this year and the U.S. met 81 percent of its energy needs in 2011, the most since 1992, refinery closures have left East Coast stockpiles of motor fuel at a four-year low, Energy Department data show.
“The market was already on edge because of tight supply, but some wholesalers put off buying hoping supplies would appear,” said Phil Flynn, senior market analyst at Price Futures Group in Chicago.
— With assistance from Aaron Clark and Christine Harvey in New York and Rob Sheridan and Nidaa Bakhsh in London.