Forecast: Cheaper Gas Coming Soon

DENVER (Sept. 11, 2018) – AAA Colorado forecasts that the statewide gas price average will drop to $2.70 per gallon this fall, with even steeper savings possible. That's 18 cents less a gallon compared to today's price and more than a quarter cheaper than May's recorded yearly high of $2.97.

"Plain and simple, gasoline is just cheaper to produce this time of year," said AAA Colorado spokesman Skyler McKinley. "On top of that, Labor Day marked the end of the summer driving season and, with it, a significant drop in consumer demand. Combine those factors with relatively stable crude oil prices and you'll get savings at the pump at each fill-up this fall."

Still, several outliers could reverse this forecast, including the price of crude oil, geopolitical tensions, and an active hurricane season. The threat of Hurricane Florence - which is now a Category 4 storm and projected to hit between South Carolina and Virginia - will likely have an impact on East Coast gas prices this week should the storm follow its projected path. It is unlikely any related spike in gas prices will affect Colorado, which draws its crude oil and petroleum primarily from Wyoming, Texas, and Kansas. Additionally, there are no refineries in Florence's path - so overall U.S. crude processing won't be affected.

2018 gas prices have been significantly more expensive than 2017. Nationwide, the year-to-date gas price average is up 41 cents. Coloradans, meanwhile, are paying an average of 38 cents more per gallon, year over year.

The Vail area features Colorado's priciest gasoline, at $3.27 for a gallon of regular. Gas is presently cheapest in Durango, where motorists are paying an average of $2.76 per gallon. In Denver, gas runs $2.82 per gallon. Gas prices hit an all-time high in July 2008, with a gallon of regular unleaded going for $4.09, on average, statewide.
 
What will drive pump prices down this fall?

On September 15, refineries will switch from producing summer-blend to winter-blend gasoline. What's the difference? Winter-blend has a higher Reid Vapor Pressure (RVP) level, which measures how easily the fuel evaporates at a given temperature. The more volatile a gasoline, the higher the RVP - and the easier it evaporates. Winter-blend fuel has a higher RVP because the fuel must be able to evaporate at low temperatures for the engine to operate properly, especially when the engine is cold. It contains fewer additives and less energy than summer-blend fuel, making it cheaper to produce. In addition, fall's arrival historically signals a drop in consumer gasoline demand as summer road trips and vacations subside.

What could prevent cheaper gas prices from coming to Colorado?

Crude Market Volatility: Much of 2018 has brought volatility to the domestic and global crude markets, as market watchers try to glean insight into forces that will shape global supply this fall. These forces include:

• Venezuela is a major crude producer for the Western Hemisphere. Its collapsing economy could halt its crude production.
• The Organization of Petroleum Exporting Countries (OPEC) announced an increase in production over the summer, but slower-than-expected growth could contribute to higher crude prices.
• Geopolitical uncertainty in the Middle East and around the globe could disrupt vital crude flows.

Iran Sanctions : When President Trump announced that the U.S. would withdraw from the Iran Nuclear Deal in May, the decision sent the crude markets into upheaval. In August, the first round of re-imposed sanctions on the country, which target Iran's financial sector, went into effect and led to a brief uptick in crude prices. The next round of sanctions, currently scheduled to take effect in November, will target Iran's energy sector -- including its crude exports -- and will likely have a more sustained impact on crude prices. If those sanctions take effect, crude prices will likely surge over an expected reduction in Iranian crude exports and increased tension in the region that could destabilize global crude flows.

Updated Hurricane Forecast: The National Oceanic and Atmospheric Administration's Climate Prediction Center predicts a total of 9-13 named storms (winds of 39 mph or greater of which four to seven will become hurricanes), including up to two major hurricanes (winds of 111 mph or greater). An average six-month hurricane season produces 12 named storms, of which six become hurricanes, including three major hurricanes. The mere threat of a hurricane in the United States causes pump prices to spike, mostly regionally, due to constrained supply and delivery challenges.

AAA 2018 Gas Watcher's Guide
In time for fall, AAA is releasing the 2018 Gas Watcher's Guide with tips for conserving fuel, saving money, and maintaining fuel efficiency. The Guide offers these tips, and more, for motorists to keep in mind as they fill-up at the pump:

• If your vehicle's engine does not require premium or mid-grade fuel, don't buy it. Using anything other than regular grade is a waste of money.
• Don't top off your gas tank. Stop filling after the automatic nozzle shuts off.
• If you have to replace a gas cap, make sure it is the right one for your car. An ill-fitting cap will increase emissions and trigger the "check engine" light.
• Keep track of gas mileage. If you notice a sudden decrease in fuel economy, have your vehicle checked by a technician to ensure it is operating properly. Find a mechanic you can trust at AAA.com/Repair
• Motorists can find current gas prices at GasPrices.AAA.com and along their route with the free AAA Mobile App for iPhone, iPad, and Android. The app can also be used to map a route, find discounts, book a hotel, and access AAA roadside assistance. Learn more at AAA.com/Mobile .

About AAA Colorado
More than 680,000 members strong, AAA Colorado is the state's most-trusted advocate for the safety and security of all travelers. As North America's largest motoring and leisure travel organization, AAA provides more than 58 million members with travel, insurance, financial, and automotive-related services - as well as member-exclusive savings. For more information, visit AAA.com.

Parts & People

Parts & People is published monthly by Automotive Counseling and Publishing Company, Inc., a Colorado corporation, P.O. Box 18731 Denver, CO 80203, 303-765-4664. President-Lance Buchner. Founded by Lance Buchner and Dave Lucia.