Gas Price Plunge Takes US Average to $2.89

AASHTO Journal, 21 November 2014

2014 gas price chart.
Source: U.S. Energy Information Administration.

​The recent steep decline in retail prices of motor fuel continued in the latest week, with the U.S. Energy Information Administration’s weekly survey pegging the national average pump price of gasoline at $2.894 a gallon as of Nov. 17, down more than 32 cents from a year earlier.

The trend is also lowering the EIA’s weekly diesel price average, which is used across the trucking and railroad industries to set fuel surcharges that carriers pass on to their freight customers. The EIA put the Nov. 17 national average pump price for diesel at $3.661, down 16 cents from the same point last year.

While those prices fall, governors and lawmakers in several states are weighing transportation revenue measures that could include hiking fuel taxes after many years of leaving those fees untouched.

Iowa Gov. Terry Branstad recently told reporters he is starting talks with legislative leaders on a new funding package, and said “I think the timing is good because gas prices have dropped significantly.”

In Wisconsin, Transportation Secretary Mark Gottlieb submitted a two-year WisDOT budget that proposed higher motor fuel taxes along with various other revenue measures, for Gov. Scott Walker and that state’s legislature to consider. (See Wisconsin story in the States section of this week’s Journal.)

The price drop is also causing some problems for Kentucky, which has much of its motor fuel taxes for road projects tied to wholesale fuel prices, without a mechanism to prevent a sharp decline in tax receipts. The Kentucky Transportation Cabinet said a lower excise tax level that kicks in Jan. 1 could quickly take tens of millions of dollars out of project spending, and more than $100 million if sustained over a full year. (See Kentucky story in States.)

AAA, which surveys fueling stations on a daily basis and reported its national gasoline average at the same $2.89 as of Nov. 17, said that marked 53 consecutive days of declining pump prices for gas. That is “the longest streak of declines since 2008,” AAA said.

Back then, the drop was tied to the collapsing economy after an earlier sharp spike in fuel prices. But this time U.S. output continues to grow even though some other big parts of the global economy are weak.

New data shows Japan has suffered two straight quarters of declining output, meaning it has fallen into recession. Europe continues to show weakness as well. That curbs global oil demand and fuel prices, but could hurt demand for U.S. exports.

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