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New Threat Could Send Oil and Gas Prices Higher Again

Pump prices for gasoline have been declining for nearly a month, but there’s a new concern over something that could send them soaring again.
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Gasoline prices have been on a sustained downtrend for nearly a month since peaking in early June.

The national average price for a gallon of unleaded regular gasoline is back under $4.80, after topping $5 a few weeks ago.

And after a sharp drop earlier this week that saw West Texas Intermediate crude oil prices fall below $100 a barrel, some analysts are predicting that gasoline will fall below $4 a gallon in many states in the not too distant future.

“GOOD NEWS,” tweeted Patrick De Haan of Gas Buddy on Wednesday. “In the days and weeks ahead we're going to see hundreds, nay, thousands of stations falling back under $4 per gallon.”

De Haan said prices at stations in southern states such as South Carolina, Georgia, Mississippi, Louisiana and Texas were among the mostly likely to see the lower prices.

Even California, home to the highest average gasoline prices in the country, could see prices fall below $6 a gallon in the near future, according to De Haan, assuming there are no issues with refineries in the state.

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It’s Not All Good News

The reasons for the decline in gasoline prices aren’t exactly great, however.

That's because growing fears of an economic slowdown or recession are having a significant impact in weighing on price expectations. 

And, true to their volatile nature, energy prices continue to swing sharply, both up and down, suggesting that the at the moment the selloff may be overdone.

“We believe this move has overshot,” Goldmans Sachs analysts wrote this week “While risks of a future recession are growing, key to our bullish view is that the current oil deficit remains unresolved.”

And there’s another key wildcard analysts are looking out for over the next few weeks.

That’s the risk of hurricanes in the Gulf of Mexico that could shut down production in some of the country’s key oil producing areas.

Energy analysis company OPIS noted that “August is the critical month during hurricane season,” in promoting an energy webinar later in July. “All hurricanes that make U.S. landfall destroy gasoline demand for a period but it’s the rare storm that impacts supply. Will this year be different and why?”