Gasoline Futures Plunge On Supply News

This just in...there's plenty of gasoline and there's no reason for the price to be so high. Energy traders got the message today and, as a result, gasoline futures plunged in price.

The price decline was so steep it triggered a temporary halt to trading at the New York Mercantile Exchange.

The bad news for energy traders but good news for motorists comes in response to today's unexpected report from the U.S. Energy Information Administration, showing the U.S. Stockpile of gasoline is getting bigger, not smaller.

The government report said gasoline supplies rose by 1.3 million barrels. Nearly all the analysts were predicting another in a series of declines.

There's also more crude oil on hand. The EIA report shows crude oil supplies rose by 3.8 million barrels last week. As a result, energy traders couldn't get out of their gasoline positions fast enough.

26 cent drop

June reformulated gasoline – the kind used for summer driving – dropped by 26.09 cents a gallon to $3.1188 a gallon, a decline of nearly eight percent. Oil prices also took a big hit today, with light sweet crude down about 3.5 percent. In fact, energy was lower across the board.

What does it mean for consumers? It probably means short term gasoline prices have peaked, barring some unforeseen catastrophe. The average price of self-serve regular rose slightly today, according to AAA. But the modest increase follows five straight days of declines.

If futures prices continue to trend lower in the days ahead, gasoline prices will probably start falling fairly quickly. However, if trading remains volatile, all bets are off.

There's plenty of evidence to suggest prices will continue to fall. Today's government report shows oil stockpiles at a key Oklahoma storage facility are near record highs. Tuesday, MasterCard reported weekly demand for gasoline fell 0.5 percent, as consumers reacted to prices approaching $4 a gallon.