NASHVILLE (November 5, 2018) -- Tennesseans are finding the lowest prices at the pump since April. The state average price for a gallon of regular unleaded is $2.56 - 17 cents less than this year's high, and 28 cents more than this time last year.
Gas prices continued their downward trek last week, declining another 5 cents. The state average declined for the 24th consecutive day on Sunday, for a total discount of 14 cents.
Click here to view AAA's state and metro gas price averages
Most expensive gas price averages: Nashville ($2.62), Morristown ($2.58), and Jackson ($2.58)
Least expensive gas price averages: Cleveland ($2.46), Chattanooga ($2.48), and Knoxville ($2.52)
"Tennesseans are saving 20 cents per gallon, compared to when gas prices peaked during Memorial Day weekend," said Mark Jenkins, spokesman, AAA - The Auto Club Group. "Gasoline is becoming less expensive to produce-and-sell thanks to lower crude prices and cheaper-to-produce winter blend fuel. Retail prices have not quite caught up with declines on the wholesale side, so motorists should see another round of discounts this week. However, fuel prices definitely have the potential to reverse course based on any fluctuations in the stock market due to Election Day and the activation of U.S. sanctions against Iranian crude. Regardless, AAA believes the highest prices of the year are behind us."
Why are Crude Prices Falling?
Crude oil prices are hovering near 7-month lows. On Friday, WTI settled at $63.14 per barrel - nearly $4.50/b less than the week before, and the lowest daily settlement since April 6, 2018. The weekly average price for U.S. crude has declined the past four consecutive weeks. Before then, crude prices faced upward pressure amid growing concerns that U.S. sanctions against Iranian crude would cause a global supply shortage. However, those concerns are being quelled by increased production by countries like the U.S., Saudi Arabia, and Russia.
Crude production in the U.S., Saudi Arabia and Russia all remain strong. U.S. oil inventories rose for the sixth consecutive week, according to weekly data from the Energy Information Administration. Domestic supplies rose 3.2 million barrels from the week before. Meanwhile, gasoline inventories dropped by 3.2 million barrels. Meanwhile, OPEC production levels for October reportedly reached the highest output levels since 2016 as some members boosted production in preparation of the Iran sanctions.
More on U.S. Sanctions Against Iran
Friday, the Trump Administration announced the U.S. would re-impose sanctions on Iran that were lifted in 2015 under the Obama Administration. The sanctions, which will go into effect on November 5, 2018, target the Iranian energy sector and impede Iran's ability to sell oil.
According to the Energy Information Administration, Iran ranks as the world's fourth-largest reserve holder of oil. Iran also ranks among the world's top 10 oil producers, producing almost 4.7 million b/d of petroleum and other liquids in 2017. While Iran is an oil powerhouse, Saudi Arabia (9 percent) and Iraq (6 percent) are the top two OPEC countries exporting to the U.S. and 2 of the top 5 countries overall that sell oil to the U.S.
In May, when the decision to re-impose oil-related sanctions was announced, the market reacted quickly with crude oil prices (WTI) peaking at $77 per barrel this summer. As the crude market saw big upward price swings due to concerns about restricted global supply, Iran started to feel the impact on oil exports. According to the Trump Administration, Iran went from exporting 2.5 million b/d in May to 1.5 million b/d in October and over twenty countries have reduced their imports of Iranian oil to zero. Exports are expected to drop further, but not immediately. Bloomberg reports that the U.S. has granted temporary waivers to eight countries - including Japan, India and South Korea - allowing them to continue to import Iranian oil. Those receiving the waiver are expected to continue cutting imports.