Fuel prices poised for downward fall again | VailDaily.com

Fuel prices poised for downward fall again

EAGLE COUNTY — After flirting with the $2 level at times over the winter, summer gasoline prices in the Vail Valley are back near, or just more than, $3 per gallon. But there's good news, both now and in the near term, as long as you aren't in the oil-exploration industry.

While gasoline prices are at highs for this year, those prices are still far below those charged at a pump a year ago. In Vail, a gallon of regular is about 85 cents less than it was this time in 2014. Unlike most things gas-related in the valley, that drop is about in line with prices paid across the state.

Information from GasBuddy, a price-analysis company, shows prices across Colorado are about 85 cents per gallon less than they were this time in 2014.

Supply Glut

“What we’re seeing, at least for Colorado travel, is for driving vacations, they’re (taking trips) no matter the price.”Wave DreherCommunications specialist, AAA Colorado

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The drop in prices is the result of a months-long supply glut in the world oil markets that continues to keep crude oil prices down. Will Speer, a senior petroleum analyst in GasBuddy's Houston office, said those crude oil prices could drop even more. Current prices are driven in part by speculation whether Iran will start pumping oil into the world market again after years of international sanctions.

If that happens, then even more oil from the Middle East could further depress prices and drilling in this country.

Oil Companies Tighten belts

The oil glut has already hit hard in oil companies that are involved in both exploration and refining, Speer said. The Associated Press reports that Exxon's profits for the second quarter of 2015 fell by 50 percent from the same period in 2014. Thousands of oil field jobs have been cut across this country.

On the other hand, Speer said companies that are only in the refining business are still doing well. There's still plenty of oil on the market, and that oil is inexpensive, which means refiners are churning out products.

Pay more, protect more

Still, summer prices in Colorado have been going up for several weeks, and the prices here are higher than in neighboring states. Former Eagle resident Kevin Allen noted recently on Facebook that prices in Kansas are as much as 30 cents per gallon lower than in Colorado.

Wave Dreher, communications specialist for AAA Colorado, said summer-blend gasoline mandated by environmental rules in Colorado, generally adds 10 cents per gallon to prices. Greater demand in the summer also increases prices due to demand. But another problem hit the state's gasoline supply this summer.

Squeeze on Fuel Supplies

There's only one oil refinery in Colorado, in the Denver area, and that facility can't supply all of the state's needs. That means a good portion of the state's fuel supplies comes from refineries in the Texas panhandle. One of those refineries was slowed significantly for repair work the first part of the summer, putting a squeeze on fuel supplies.

But, Speer said, that refinery is back to full production.

A combination of full supply lines and less demand starting in about September, is expected to drive prices back down into the fall.

Summer Travel increase?

While prices remain significantly lower than in 2014, Dreher said the state hasn't seen an increase in summer travel.

"If you talk to tourism (industry) folks, they're mostly optimistic, but the numbers aren't necessarily reflecting that," Dreher said. "What we're seeing, at least for Colorado travel, is for driving vacations, they're doing it no matter the price."

The difference, Dreher said, is what people are able to do while they're traveling. When gas prices nationwide peaked in 2008, people still hit the road. But, she said, families traveled shorter distances, and fuel costs put a crimp on other spending.

"People downgraded hotels and restaurants, and didn't buy souvenirs," she said.

So, while prices are expected to drop in September and beyond, don't expect many more cars on the road. But there could be a few more hats and sweatshirts in the family wagon as people come back from wherever they've been.

Vail Daily Business Editor Scott Miller can be reached at 970-748-2930, smiller@vaildaily.com and @scottnmiller.

By the numbers

85 cents: Difference in per-gallon gas prices in Vail, for the same week this year and 2014.

$2.96.5: Average per-gallon gas price in Eagle County as of July 31.

$47.16: Per-barrel price of oil as of July 31.

$43: Per-barrel price of oil in March, the low for the year.