Experts say prices could fall by over 50 cents a gallon by July 4; after then, everything depends on hurricane season.
After setting record highs less than a month ago, gasoline prices are on the way down.
Experts say motorists can expect gradually declining prices from now until July 4. After the Fourth, and barring any unforeseen event like war with Iran, the cost of gas will largely depend on how the hurricane season shapes up.
Nationwide average retail prices have fallen from a record high of $3.23 a gallon at the end of May to about $3.07 as of Tuesday, a drop of roughly 5 percent, according to the motorist organization AAA. The government reported a similar decline in its latest weekly survey.
Prices for gasoline futures on the New York Mercantile Exchange have fallen much further.
The front-month contract on NYMEX has slid nearly 45 percent since hitting a high of $2.44 a gallon in late April.
"I certainly think prices for the summer have peaked," said Stephen Schork, principal of the industry newsletter the Schork Report and a former NYMEX trader. "I can see [retail prices] getting back down to between $2.50 and $2.75."
Retail prices kicked off the year averaging just over $2 a gallon, pushed lower all fall by a 2006 hurricane season that never materialized and an early winter drop in crude prices sparked by concerns over economic growth.
But while crude prices gained about 30 percent since the start of the year, gasoline prices surged over 50 percent as one refinery after another shuttered production and gasoline supplies ran low heading into the summer driving season.
Refinery production is still well below normal, as are gasoline inventories. But inventories have grown for the last several weeks, helped mostly by higher imports, but also due to an easing of demand.
Throughout the winter gasoline demand was growing by a higher-than-usual 2.5 percent. It’s now down to it’s normal 1.5 percent, and could slacken still.
"There was a large enough section of the population that curtailed their habits just a little, " said Tom Kloza, chief oil analyst at the Oil Price Information Service. "I think you’re going to see some very soft demand numbers in the next few weeks."
Kloza sees retail gas prices falling to maybe $2.80 a gallon sometime between now and July 4, but said "there will be some storm hype, and that will give gas prices some staying power."
Just before July 4 there may be a bump up in prices, as Americans hit the road in what will most likely be record numbers, driving demand for gas higher.
After that, it all depends on hurricane season, which officially began June 1 but doesn’t usually produce the big, powerful storms until August or September, when the ocean water is at its warmest.
Hurricane experts are predicting an active season, but oil analysts say the chances of another massive storm making a direct hit on refinery country, like Katrina did, are slim.
"The odds of that happening, it would just have to be the most perfect of perfect storms," said Schork.
If it does happen, Schork said to expect a retail price jump of at least 18 percent, which was the one-week price spike following Katrina. If gas was $2.80 a gallon, that would push prices to $3.30 a gallon, a new record.
Barring such a storm, analysts see prices declining further in late September and falling for the rest of autumn, possibly reaching the low $2 range they hit at the end of last year.
But until hurricane season is safely behind us, traders will remain jumpy.
As Mike Fitzpatrick, an analyst at the energy desk of Man Financial put it: "Nobody expects we’ll go through the season completely unscathed like last year."