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AAA Predicts Less Pain at the Pump in 2013

OKLAHOMA CITY Okla_ Tuesday's national average price for a gallon of regular gasoline is $3.30.

As recently as Dec. 20, the nationwide average stood at $3.22. However, after setting new all-time daily records for each calendar day since Aug. 20, the price last Saturday fell below the year-ago national average. 

In Tulsa, the average price for regular gasoline jumped eight cents overnight to $2.912, although in Oklahoma City, citywide price averages are falling, down two-tenths of a cent in the last 24 hours. Today's Oklahoma average ($2.988) is up 1.3 cents from yesterday, driven largely by the Tulsa price increases.

According to FuelGaugeReport.AAA.com, motorists in six states (Utah, Wyoming, Colorado, Minnesota, Idaho and Oklahoma) currently pay less than $3.00 per gallon at the pump. Oklahoma's average is sixth-lowest of all the states. Utah is the country's price leader at $2.90. The average price in Texas today is 18 cents above Oklahoma's. Only drivers in Hawaii pay more than $4.00 per gallon. The highest average prices in the continental United States are found in California and in the Northeast.

The decreases in compressed natural gas (CNG) prices are being driven by provisions in the American Taxpayer Relief Act, passed last week by Congress to avert the "fiscal cliff." The measure includes a one-year extension of the tax credit on the sale of CNG and liquefied natural gas (LNG) for vehicle use and for the installation of natural gas fueling equipment. Specifically, this is a 50-cent per gasoline gallon equivalent tax credit for CNG, a 50-cent per gallon tax credit for LNG and a $30,000 infrastructure tax credit.  These tax credits are extended until Dec. 31, 2013 and are retroactive for all of 2012.

While retail gasoline prices are currently rising at a slower rate than they did to start 2012, the average is pressured higher by crude oil prices that have continued to slowly increase in recent weeks. At yesterday's close of formal trading on the NYMEX, the price of West Texas Intermediate crude oil settled at $93.19 per barrel, up 10 cents on the day. This is the highest settlement price since Sept. 18, but is still well below the 2012 high of $109.77 per barrel registered on Feb. 24.

Gasoline prices this year will be less expensive than in 2012 as a result of increased domestic oil production and lower demand, according to AAA. The national average price of gasoline should peak at $3.60-$3.80 per gallon barring any significant unanticipated events, which compares to a peak of $3.94 a gallon in 2012.

Gasoline prices should rise steadily through April or early May, but at a slower pace than last year. As is typical for this time of year, prices will rise as a result of seasonal demand increases and in anticipation of the switchover to more expensive summer-blend gasoline. Following a late-spring peak, national price averages should drop during the first half of the summer to as low as $3.20-$3.40 per gallon before rising again in advance of the Gulf Coast hurricane season and the switchover to winter-blend gasoline. Prices should end the year by falling to low or near-low averages for 2013.

Absent significant storms, major wars or production and distribution outages, the single largest factor that will influence gasoline prices in 2013 will be the strength of the U.S. economy. Stronger than expected growth in the economy would result in higher oil and gasoline prices in anticipation of higher consumption, while a weaker than expected economy would drive prices downwards. Inaction by Congress to reach a debt deal in two months also would result in increased concern about the U.S. economy and could lead to lower gasoline prices.

In the first 90 days of 2012, geopolitical tensions with Iran pressured the national price at the pump almost 65 cents higher. Without a similar market moving story to begin 2013, it is likely that the year-over-year discount will widen in the coming months.

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