The average price of regular unleaded gasoline reached $2.79 per gallon in July, down one cent from June. Gasoline prices averaged $2.51 per gallon over the first seven months of the year, which is 29% below last year’s $3.55 average.

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After rising by a combined 25.7% between February and May, crude oil prices ticked lower over the past two months. West Texas Intermediate (WTI) prices fell by a sizable 14.9% to an average $50.90 per barrel in July, while Brent prices dropped 8% to $56.56 per barrel. WTI prices were 51% lower over the first seven months of the year compared to 2014, while Brent prices were down by 47%.

After upward revisions to June output levels, domestic crude production dropped 1.1% from 9.54 million barrels per day (mbpd) to 9.44 mbpd in July, however, production over the month was 7.9% higher than in July 2014. The pullback in drilling due to low crude oil prices has curtailed domestic production growth. Production year-to-date (YTD) has only grown by an average of 0.1% per month, which is significantly slower than the 1.5% rate averaged over the same period last year.

But while domestic production is slowing, declining production costs and increased efficiency among those rigs still online will allow crude output levels to continue outpacing those observed through much of 2014. Reinforcing this point, domestic production YTD stands 13% higher than it was through July 2014.

In terms of usage, crude oil consumption in the U.S. reached 19.6 mbpd in July, up 2.1% from last year’s 19.2 mbpd. Consumption YTD has been on average 1.4% higher than in 2014. 

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U.S. crude oil inventories fell for the third month in a row in July, dropping by 2.3% compared to June. Even so, inventory remained more than 20% above year-ago levels and YTD supply has been on average 21% higher than in 2014.

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Looking ahead, industry analysts are expecting a bit more movement in prices throughout August. At $2.76 per gallon one month ago, prices have already dipped to $2.72 per gallon. Although the first two weeks of August saw quite a bit of volatility in gasoline pricing—which is par for the course when it comes to energy prices—lower crude futures prices in July indicate that gasoline prices will continue to trend lower in August.

For August, NADA Used Car Guide estimates the price of regular unleaded gasoline will average $2.65 per gallon, down $.14 from July. This estimate is $.21 per gallon above NADA UCG’s January estimate of $2.44 per gallon. The EIA estimates gasoline prices will dip to an average of $2.60 per gallon this month, which is a $.19 increase from its original projection of $2.41 per gallon. While both estimates are above initial projections, they remain well below last August’s average of $3.49 per gallon.

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For the past few months, the EIA has continued to maintain an optimistic view toward crude oil pricing and as such gasoline prices. It appears the EIA will continue to hold this viewpoint given that it expects gasoline prices to reach $2.04 per gallon in December. While NADA UCG is also projecting a decline in prices, our $2.41 end-of-year estimate is a more conservative (37 cents more to be exact) than the EIA’s.

Given the highly volatile nature of energy markets, both forecasts are likely to change over the coming months, but based on previous month estimates, it’s likely the EIA will continue to hold the more optimistic stance on gasoline pricing.