Gas prices are falling in Chicago and across the country thanks to ample supplies of crude oil and, some analysts say, a looming price war among oil-producing countries in the Middle East.
A gallon of regular unleaded gas averaged $3.26 in the U.S. on Monday, the lowest level in 10 months and 12.5 cents less than this time last year, according to a survey of 2,500 filling stations conducted by Lundberg Survey in Camarillo, Calif.
In Chicago, gas averaged $3.72 on Monday, the lowest since Feb. 11, said Beth Mosher, a representative for AAA-Chicago. The Chicago metro area and Illinois are enjoying the lowest prices since Christmastime last year, averaging $3.45 and $3.31, respectively, she said.
“I live in Naperville and I was on the way to work, and I saw a gas station that was $3.07 and I had to do a double take,” Mosher said. “I thought that surely, it can’t be right.”
Chicago, which has among the highest gas prices in the country after San Francisco and some cities in Alaska and Hawaii, is more expensive because of higher taxes as well as laws that require that Chicago use a pricier, lower-emission blend year-round even as other markets switch to a cheaper winter-grade blend, Mosher said.
Also, because only a few refineries can supply Chicago with that blend, any disruptions or maintenance issues at those facilities can upend the system, she said. (Chicago’s record high was $4.67 in March 2012, driven up by issues in the Middle East, Mosher said.)
Abundant supply of crude oil has driven oil prices down, while a trend away from driving has dampened demand, Mosher said. Barring unforeseen circumstances, such as refinery problems, she expects that prices will continue to drop.
Trilby Lundberg, president of Lundberg Survey, said national gasoline prices have decreased for 16 consecutive weeks because of lower crude oil prices, and pump prices may fall by a dime or more in the next few days if crude oil prices remain near current lows.
“Crude oil price declines were passed through by refiners and into their wholesale-gasoline prices,” Lundberg told Bloomberg News. “World demand growth has been weak. There’s certainly a flush supply of barrels hitting the market, chasing world demand.”
Patrick DeHaan, a senior petroleum analyst at Chicago-based GasBuddy.com, believes Chicago could see its lowest gas prices since 2011 within a week or two, and some filling stations in the suburbs could fall under $3 a gallon this week.
More then seasonal shifts or declining demand, DeHaan believes that announcements that Saudi Arabia, Iran and Iraq are cutting oil prices are putting pressure on oil and gas prices here.
“That is going to have a monster impact on oil prices,” DeHaan said.
But Carl Larry, president of Houston-based Oil Outlooks and Opinions, expects that as unemployment rates improve, holiday hiring commences and people have to drive to work, gas prices should stabilize and won’t drop much further.
Larry attributes the decline in gas prices to rising production of crude oil and gas in North America. The U.S. will produce 9 million barrels of crude oil a day this year, compared with 5 million in 2011, and it has increased its imports from Canada and Mexico while cutting imports from overseas.
“America really is seeing the first case of energy independence,” Larry said. “We are producing our own crude, we are producing our own gasoline.”
Global oil prices also have been falling as members of the Organization of the Petroleum Exporting Countries keep production high to maintain market share amid weak demand and the loss of U.S. business.
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But Larry said that doesn’t affect the United States much.
“For the first time in history, OPEC is in a price war within themselves,” Larry said. “The rest of OPEC is out there looking for a bone.”
Bloomberg contributed.