Analysts say there's simply too much gasoline and too much oil, and prices were falling Monday amid crude supply concerns. West Texas Intermediate oil futures dropped 2.4 percent to $43.13 per barrel. According to AAA, the national average for unleaded gasoline is down 15 cents in a month.
"These are the cheapest gasoline prices for the end of July since 2004. There's 36 states where you see gas less than $2 a gallon. The really cheap prices will be between Labor Day and Election Day," said Tom Kloza, global head of energy analysis at Oil Price Information Services. Kloza expects the national average to fall below $2 per gallon, and said another 10 percent decline could easily be in store.
The drop in crude oil has not been unexpected, and John Kilduff of Again Capital said it could bottom in October. That's because refiners, now running at high levels, will be shutting down for maintenance in the next month or two, using even less oil, as they make a switchover for winter fuel production.
"Q4 is artificially high demand season for the Northern Hemisphere because of the winter. If there's a chance for the market to balance it will occur then," said Kilduff. He warned, however, that last December was quite warm, and demand was low.
In the latest weekly government data, consumers used 9.8 million barrels of refined gasoline while refiners manufactured 10.1 million barrels.
"I think you could make the argument that you've got some weakness between now and when refiners take their equipment down because there's too much gasoline and too much diesel," said Kloza. "That could bring crude to $39 to $40. For crude oil and gasoline, I think the bottom comes during campaign season this year."