The summer rally in gas prices cooled last week in New Jersey and nationwide, but analysts are uncertain whether relief will last.
The average retail gas price fell 1.8 cents a gallon last week, to $3.56, according to website GasBuddy.com's survey of 3,525 outlets in New Jersey. The drop coincided with a national decline of 2.7 cents a gallon, to $3.65. Likewise, AAA reported last week's drop ended a 12-day rally of escalating prices.
Prices in New Jersey are still 23 cents higher than a month ago and, 11.2 cents higher than last year at this time, according to GasBuddy.com. A senior analyst with the website, Patrick DeHaan, said prices appeared to have peaked, but little evidence suggests a sustained drop.
"What we're seeing, at least for now, is that the rally has run out of steam," DeHaan said. "At least until a new trend is identified, gas prices are going to linger or possibly go sideways. We're waiting for the next piece of big piece of news to drop, either to push the rally forward or for the bears to re-emerge."
DeHaan said large decreases in crude inventories may trigger rising oil prices in the coming weeks. Plus, DeHaan said, the onset of hurricane season is a big unknown as September approaches.
AAA spokeswoman Tracy Noble said New Jersey prices dropped another 2 cents a gallon over the weekend — AAA's New Jersey average now stands at $3.59 — but higher demand is expected ahead as families take their final vacations before children return to school. AAA said vehicle miles traveled, which measures demand for motor fuel, reaches its annual zenith during the first two weeks of August.
"The good news continues; we just don't know how long it is going to last," Noble said. "We hope it will continue the rest of summer and into fall, when we switch over to winter-fuel blends. That being said, we don't know what hurricane season will bring."
DeHaan recalled unforeseen damage caused by Hurricane Katrina in 2005 and the resulting spike in oil prices. DeHaan said oil rigs have been beefed up since, but there has not been a similar storm like Katrina to strike the Gulf region.
"Who knows what can happen next time around? With the number of refineries dwindling, a big storm can knock out a bunch of refineries in the Gulf. That is probably going to have a significant impact on gas prices," DeHaan said.
According to AAA, several factors have contributed to oil's recent rise, including reported production issues at the Irving's St. John Refinery, in Canada, that has a scheduled maintenance turnaround in October, plus continued tension in Egypt and the Middle East.
Crude oil settled at $104.70 a barrel Friday, compared with $86.20 one year ago.
The U.S. Energy Information Administration data show crude inventories are now 15.9 million barrels below last year's level, while gasoline demand is up. DeHaan said part of the reason inventories are down is that refineries have become more efficient.
Reporter Tom Zanki is @BizTZanki on Twitter.