Gas Prices Appear To Be Headed Lower

Crude oil prices were trading lower in early Monday trading, boding well for consumers praying for relief at the gas pump. But how quickly that relief comes is far from certain.

The retail price of gasoline continues to fall, though not very fast. The national average price of self-serve regular was down about a half-cent today, to $3.955 a gallon, according to the daily AAA Fuel Gauge Survey.

It peaked May 5 at $3.985 a gallon and has fallen a fraction of a cent nearly every day since.

Crude oil falling

Crude oil, meanwhile, continues to drop and Monday was trading around $98 a barrel in both the U.S. And Europe. In testimony before the Senate Finance Committee last week, Exxon Mobile CEO Rex Tillerson said the “real” cost of a barrel of oil is around $60 to $70.

The rest of the price, he said, is due to speculators, who have factored in the fear that supplies will fall. At first that fear was based on political turmoil in the Middle East, which has yet to adversely affect oil output.

Secondly, there was speculation that a strong economic recovery among industrialized nations would spur demand for energy and lead to shortages. The latest economic data, however, suggests the global economy is less than robust.

Thirdly, traders were betting that the Federal Reserve's monetary policy would continue to erode the value of the dollar, making oil and other commodities more expensive. But the Fed has announced it is ending its so-called “quantitative easing” policy and the dollar has been gaining new strength lately.

Where are the lower gas prices?

So, why haven't gas prices at the pump fallen faster? Because traders still have one more fear – the rising Mississippi River that threatens to flood refinery-rich Louisiana. A Maryland wholesale distributor cited the floods last week in justifying an overnight 25 cents a gallon hike in fuel prices, a move that triggered Attorneys General investigations in both Maryland and the District of Columbia.

But that fear, too, is apparently unfounded. Only 14 percent of total U.S. refining capacity is located in that region, and other refineries have plenty of spare capacity to turn out more gasoline, if needed.

But it isn't needed. The latest report from the U.S. Energy Information Administration showed a big jump in gasoline stockpiles last week, with a key Oklahoma storage facility full to the brim.

President Franklin D. Roosevelt famously said “we have nothing to fear but fear itself.” For consumers, fear is costing them at the gas pump.