Why Are Gasoline Prices Suddenly Falling?

A dramatic spiral for gasoline prices in some key battleground states comes just three weeks before the U.S. presidential elections.

Ohio voters have watched prices at the gas pump drop by nearly 20 cents on average in the past week. At the same time, retail gas prices have plunged more than 10 cents in Wisconsin and Illinois.

Even in California, where the average gas price in the state reached the highest level on record on October 9, prices are now lower by about a dime. Nationally, on average, gasoline prices have fallen 5 cents since last Wednesday to $3.76 a gallon.

If the steep slide in pump prices — as well as the decline in the futures market — is any indication of what is to come, voters in several states may see gasoline prices closer to the $3 mark by Election Day than recent highs around $4 a gallon, some analysts say.

A series of U.S. refinery glitches and tight supplies in some regions caused gasoline prices to surge earlier this month to the highest prices since the spring. But the switch to a less expensive winter grade of gasoline, weak refinery demand and increase of supplies in certain areas caused gasoline prices to start coming down. An unexpected increase in U.S. gasoline supplies in the past week could cause pump prices to fall even further.

The U.S. Energy Information Adminstration reported domestic gasoline supplies rose in the past week, when many analysts had forecast a decline. Meanwhile, gasoline demand over the past four weeks continued to decline compared to a year ago.

In the end, supply and demand is causing prices to moderate once again.

Source: Sharon Epperson, CNBC

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