Gasoline prices are climbing again, pumped up by a rallying oil market and a seasonal switch to more expensive summer-blends, but motorists still are enjoying the cheapest springtime fuel in six years.
The national average price for a gallon of regular was $2.54 on Monday, AAA said, a four-month high, counter to some earlier projections that prices might break their historical trend of rising along with summer vacation fuel demand. The motor club’s Daily Fuel Gauge Report found an average price of $2.33 in Houston.
“Instead of being the cheapest summer since 2005, it might be the cheapest since ’09,” said Patrick DeHaan, senior petroleum analyst at GasBuddy.com. “It’s still going to be great summer but it might not be quite as great as we previously thought.”
Crude, which accounts for about half the price of gasoline, rose last week to its highest level for the year, although it slipped a few cents Monday. Domestic benchmark West Texas Intermediate crude fell 16 cents to $56.99 per barrel. International Brent crude ended the trading day down 45 cents to $64.83.
Traders have bid up prices recently amid signs that a global glut is slowing, but the rebound may be short-lived as producers continue to add oil to the nation’s storage tanks.
“The rally in oil prices is temporary,” DeHaan said. “I believe that once the market digests that we’re beginning summer with the most amount of oil ever in inventory, things may turn around.
Aaron Calder, a senior market analyst at Houston-based consulting firm Gelber & Associates, agreed that low prices may have slowed the bonanza in production from U.S. shale fields, but not enough to stem the tide of oil hitting the market against flat demand.
“We believe prices are going to be closer to $50 than $60 as we work toward the summer,” he said.
The lingering downturn is hitting the state’s factories, particularly those that supply machinery and equipment to the energy industry.
Texas manufacturing weakened in April for a second month, according to a monthly survey by the Federal Reserve Bank of Dallas.
The production index, a key measure of manufacturing conditions, stayed in negative territory with three of 10 factories reporting declines in output compared with the prior month, according to a survey of 108 Texas manufacturers in mid-April.
The company outlook index tumbled to its lowest reading in nearly 2½ years, underscoring manufacturers’ ongoing pessimism about future business conditions, based on the responses. Factories that fabricate metal parts appear hardest hit, with executives complaining about a slowdown in business from the energy industry.
“Our oil and gas customers have come to a complete stop,” a metal fabrication executive said in the survey. The Federal Reserve keeps comments anonymous. “It looks like everyone in the industry is digging in for a long-term trough.”
Gone are the expectations for a rapid rebound, which analysts sometimes refer to as a “V-shaped” recovery because of the way it appears on a graph charting prices over time. Predicting a prolonged period of distress, one executive wrote that recovery now looks like “a bathtub with a large drain at one end that will take some suppliers down.”
Companies are cutting workers’ hours – the April survey marked the fourth month in a row of slightly shorter workweeks – and 17 percent of firms reported net layoffs.
“Things are getting ugly in all of our locations in Texas and Oklahoma,” one metal manufacturing executive wrote. “Total business is down 20 percent year to date, and we do not believe we have seen bottom. As of now, we do not expect a meaningful recovery until mid-next year.”
The oil collapse that’s hit parts of the Texas economy has also been a boon to consumers, who are expected to pocket hundreds of dollars in fuel savings compared with 2014.
Source: Houston Chronicle