Drivers on the West Coast and nationwide are enjoying a second week of double-digit decreases in pump prices.  The national average for regular unleaded falls 11 cents this week to $3.53 while Oregon's statewide average drops 12 cents to $3.84.  But Hurricane Sandy could send retail gas prices higher in the East temporarily due to decreased production in the wake of the storm.

Unlike Hurricane Isaac earlier this year and many other hurricanes, Sandy is impacting an area that is a major consumer of gasoline rather than a major producer.  There are isolated reports of price hikes and gas stations running out of gas.  But the demand destruction for gasoline is expected to more than offset the drop in production.

Thousands of flights have been cancelled, businesses and schools are closed, millions of people are without power and tens of millions of people are staying home in the aftermath of Sandy.  Gasoline demand at this time of year is usually near 8.5-million bpd (barrels per day) but is likely to be at least one-million bpd lower for the next several days.  This drop in demand has the potential to pressure pump prices lower.

Assuming a smooth restart to production and distribution following Hurricane Sandy, AAA expects that gas prices across the country will continue to drop as we start November and as Thanksgiving approaches, and will move even lower towards the end of the year.

Northwest Lending Group