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Gasoline prices nearly stable
Thursday, August 19, 2010

The sluggish economy has given motorists a break at the gas pump this summer.

The average retail price of a gallon of regular, self-serve gasoline has barely budged since mid-June, and industry experts expect it to stay somewhere around $2.75 -- or fall a few cents lower -- through Labor Day.

Weakness throughout the U.S. economy, declining prices for crude oil and a mild hurricane season to date have all contributed to the relatively stable gas prices.

"Consumers continue to benefit from a remarkable pattern of price stability at the retail level," Chris Plaushin, director of federal relations for AAA, said Monday in his weekly overview report on fuel prices.

In the Pittsburgh region this week, the average price for a gallon of self-serve, regular unleaded gas fell to $2.73 cents from $2.78 last week, AAA East Central reported.

Nationally, the average price was $2.74, down nearly 4 cents from a week ago, said the Energy Information Administration. That was the biggest one-week drop since May 31 and came after fuel prices experienced an upward blip the prior week following a rise in crude oil prices. In Western Pennsylvania, the cost of a gallon of gas rose by nearly 8 cents the week of Aug. 10 after crude prices soared to $81 per barrel.

While the EIA forecast crude prices could average around $81 in the second half of the year, prices slid again last week to $75 per barrel, sending prices at the pump down as well.

The drop in crude prices "is directly attributable to less than favorable economic news from the U.S. and abroad," Mr. Plaushin said.

Among the negative headlines: a growing trade deficit; a decline in demand for homes following expiration of the federal government's homebuyer tax credit; increased mortgage foreclosures; and an unemployment rate that hovers at 9.5 percent nationwide.

High inventories of oil have helped keep prices "in check or at least, consistent," said Brian Newbacher, director of public affairs for AAA East Central based in Pittsburgh.

As the economy slowly recovers, world oil demand should increase, inventories will gradually be reduced and prices will rise again, EIA said in its August outlook.

The Energy Information Administration is forecasting prices will average $2.77 per gallon of regular grade fuel for all of 2010 and $2.92 in 2011. That's up 36 cents a gallon from last summer but down from two years ago when prices peaked around $4 a gallon.

Though this year's hurricane season has not produced severe storms yet, the peak period began Monday and runs through Oct. 31. There is still a chance oil production along the Gulf Coast could be impacted by bad weather, said Mr. Plaushin.

Steady gas prices could be a factor in increased travel during July and August.

AAA earlier this summer projected travel would jump for the Fourth of July holiday with 17 percent more Americans taking a trip at least 50 miles from home compared with the same holiday weekend in 2009.

Even if they got out of town, recession-weary consumers weren't spending as much over the Fourth. Median spending per traveler was estimated at $644, down from $693 last year over the Fourth of July, AAA said.

Recent hotel occupancy rates show more people booking overnight stays than last summer.

A report by STR, a Tennessee-based hotel research firm, said occupancy for the week ended Aug. 7 jumped 6.7 percent over the same week last year.

The average daily room rate rose 1.6 percent to $99.13.

Steve Hood, senior vice president at STR, said some of the increase resulted from large convention and conference bookings in Hawaii, southern California and Seattle, Wash.

AAA has yet to issue projections for Labor Day weekend travel but like last year, it could be slowed by the holiday falling late on Sept. 6.

When it fell on Sept. 7 last year, the number of travelers taking trips of 50 miles or more fell 13 percent. AAA attributed the decline to the holiday occurring after many school districts opened which kept many families home.

Joyce Gannon: jgannon@post-gazette.com or 412-263-1580.
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First published on August 19, 2010 at 12:00 am