Gas prices still expected to drop in January

News

January 2nd, 2013 by Ric Hanson

An analyst with the Iowa Department of Agriculture believes the bump up in gas prices right around Christmas was a temporary thing. Harold Hommes monitors prices, and says it appears retailers were looking to up their margin a bit during the holiday season. “I think it’s really kind of just a temporary bubble that’s gonna happen as we’ve draw down some supplies at the retail level, and that sends movement through pipelines. I think they’re (retailers) are just capturing some opportunities that exist because of some seasonal increases in driving,” Hommes explained. He says retailers have had trouble keeping their margins up recently as demand had dropped and supplies were up, and are taking advantage of an increase in use to make a little more on gas. But, he doesn’t expect what had been a jump up of 10 cents or more a gallon to continue as the new year progresses.

“I don’t think we should interpret that as a turnaround, where things are going to go back up,” Hommes says. Gas prices had dropped below three-dollars a gallon the week before Christmas in many areas. It was the first time since December 2011, according to Hommes, that the price had dropped below three-dollars a gallon in the state.  “I would say at least a quarter to a half of the state saw prices under the three-dollar mark, but when you look at our weekly average, we never quite got that far as a state average,” Hommes says. “So certainly the majority of Iowans did not quite see the dip below three dollars.”

The Des Moines metro dropped below three-dollars a gallon before other areas, and Hommes says that’s just a matter of being closer to the source of the gasoline supply. “The further that any market is –whether it is a small town or a large town — the further that any consumer is from a pipeline terminal, there’s a good chance that they’re going to see elevated retail gasoline and diesel prices,” Hommes says. The average price of a gallon of gas last week in Iowa was three-dollars-13-cents. The national average was three-dollars-26 cents.