Gas Prices Could Dip Below $3 by Year-End: Lutz

By Jeff Macke Tue, Oct 15, 2013


According to David Lutz of Stifel, Nicolaus & Company, consumers are going to get a big boost to their wallets before the end of the year — and the source could surprise you. According to Lutz, the Environmental Protection Agency (EPA) is about to make some long-overdue adjustments to the federal ethanol mandate that's been acting as a stealth tax on American drivers for years. The result could push the national average price for a gallon of gas lower than anything we've seen since the depths of the Great Recession.

First, a word on how we got here. As Lutz explained last summer, the 2005 Clean Air Act mandated that refiners blend ever rising amounts of ethanol into gasoline. As long as U.S. gas consumption was rising, meeting the ethanol blend requirement was arguably misguided but no more so than other economic policies with unintended consequences.

What neither the EPA nor anyone else saw coming was the drop in demand for gas. Were the U.S. Energy Information Administration's website not down as part of the government shutdown, this link would show that gas demand hasn't been this low in over a decade.

The vast majority — around 90% — of American cars don't work with an ethanol blend over 10%. When the ethanol requirements continued to rise while demand for end product fell, the refiners were reduced to buying and selling Renewable Identification Numbers (RINs), which are, in effect, credits that allow refiners to meet the terms of the 2005 Clean Air Act without producing fuel that is unsuitable for most cars.

So as demand for gas falls, refiners need to buy more RINs. From just pennies-per-gallon in January, RINs had soared over $1.40 by last summer. Lutz says as much as 75% of the additional cost was passed along to the consumer.

Therefore, in an attempt to force cleaner burning fuels into the marketplace, the EPA created a policy that ended up artificially inflating the cost of refining gas when demand fell. So the refiners and consumers got gouged for not burning enough fossil fuels. Only the government could make refinery companies look sympathetic.

Here's the good part: Lutz sees the price of RINs falling, a sign that the EPA is finally getting around to modifying their absurd policy. Once RINs are out of the equation, Lutz says the price per gallon is going to fall lower.

"I'm not going to be stunned if we see gas prices going below $3 by the end of the year," Lutz says. "That's going to be a heck of a tailwind going into the holiday shopping season."

+1 for stocking up on storage fuel when the prices drop, but then you have to spend money on stuff to make it last in storage.

Everything I own that is a small motor and runs on gasoline either does not run at all right now, or runs like shit. I gave up on gas powered chainsaws a while back, have a gas powered Echo hedge trimmer that is like a workout at the gym to start, and it was supposedly high quality.

I recently got a gas powered post hole auger. It ran when brand spankin new, now on it's second tank of fuel, hard as hell to start and keep running. Chipper - down, generator, down, gas powered chainsaw - runs briefly on starting fluid, then dies. Gas powered roto-tiller. Same story, runs on ether, dies on gas.

The only thing that I can go with to make my van get the actual factory specification fuel economy is to run super and fuel system additive.

If true, I hope it will affect Diesel prices...


I paid $4.29 per gallon last week for Diesel.

Breacher, This may or may not work for you. I only buy Stihl professional grade saws, blowers and trimmers. I have noticed on the smaller saws like the 200T which I used aloft. Becomes finicky to start if I have a couple of weeks between its usage. And yes folks, there is a difference between homeowner saws, blowers and trimmers and professional grade. Your homeowner saw will have a # like 029 they are always a odd number. The ones even you homeowners want are always even numbers like 460 or 026. They will last longer and you will get what you pay for. There also worth the expense of repair unlike the homeowner ones. You just throw those away.

I do try to use the marine formula ethanol treatment and am undecided in its effectiveness. I have used echo back in my younger days and thought it was quality enough, but nothing beats a Stihl. Huskies are OK to, but slower to start and heavy. Good low end power.

Ethanol...pure garbage.

Causes poor mileage, engine damage and directly responsible for an increase in food prices.

Try to find a station that still sales pure gas and run that in everything. Otherwise use Pri-G.

There are various fuel stabilizers around, and they all seem to work for about three or four months. But you just can't fill up a gas can and let it sit for a year. I've never used Pri-G before though. In fact, I've never even heard of it. Does it work any better?

Onward and upward,
airforce

Airforce,

I recently fired an engine that hadn't been started in 10 years. Dumped some stabilizer into the tank of stale gas and had it running in five minutes.

I regularly keep gas for 2 years before use. Note: Gas not ethanol.

I've only used Sta-Bil, because it's the only one I've ever seen in stores around here. Ethanol is definitely not good for storage, but finding any other kind at a reasonable price around here is a trick. But if you get that kind of longevity from it, I may change my mind.

Coleman fuel has a pretty long shelf life. Mighty pricey, but cheaper that the naphtha sold in paint stores. Kerosene, if stored airtight in a cool place, will last twenty years or even more with a stabilizer added. Not great for keeping your car running, but it will keep you going.

Onward and upward,
airforce

I am making the big investment in electric.

I bought a Greenworks 40v saw around a year ago and did some evaluation videos which have ended up paying for about a third of the saw through advertising revenue on the videos, but then Oregon Saw loaned me one of their 40v cordless saws which I have had for several months but only used a few times, and will either send it back or pay them for it next month, or maybe they let me keep it.

You can't really do big man logging stuff with electric saw technology yet, but for homeowner use they are fine and solve the reliability issues we have with the gas powered stuff. The solar power systems I keep aroud mitigate any need for gas, but the chainsaws still need regular bar oil.

Some of the companies are now formulating stabilizers just for ethanol fuel. I still prefer real gas. Several stations in our area have discovered a niche market. Folks will drive for miles and pay about 25 cents more a gallon for it. Most people are using it for generators and equipment just to prevent the problems Breacher described.

A lot of basic tools I use are neither gas nor battery powered. Been collecting hand tools for years. As long as your arms don't give out they'll run forever.

Yep. I used to go around to farm and estate auctions, picking up old hand saws, braces, chisels, and other woodworking tools. I used to see some old leg-hold traps that were so rusted that I didn't get near them. But old, rusted traps were selling for $3 at a gun show a while back, so I sorta wished I'd bought a few.

Incidentally, old ethanol that's gone bad isn't completely useless. I've used it in lamps and heaters without any problem. I haven't quite gotten up the nerve to try it in a kerosene stove, but I'm pretty sure it would work in there as well. Just be sure to provide for ventilation.

Onward and upward,
airforce

Where in the Hell does one BUY REAL GAS???

I got gas last week for $3.36 a gallon for the 10% BS gas. I'd LOVE to buy REAL GAS IF I COULD FIND IT.

I am in NW WA. Who might have REAL GAS hereabouts?

Try asking around at farm supply stores or tractor dealers. If it's around somewhere, they should know about it.

Onward and upward,
airforce

There is a Station in Everett that sells REAL gasoline....I think its on Broadway, north of the Stadium. I have only seen it driving By...I cvan check it on tomorrow on the way back from a doctor's appointment.

Gas $2.99 on 460 heading towards Ft Pickett.

Mr Mackenzie what's the name of this here gas station you speak of on Broadway Sir? Did you see what they were charging for it? It might be worth a drive down there if I had the name of the place so I could map quest it.

When I got gas the other day for $3.36 I asked the lady 3 times what the price of gas was as I could not believe my ears. El shockeroo!!

I'd LOVE to just get a whiff of real gas! This alcohol gas just plain smells funky.

There's a Shell station here in Tulsa that has it. If there are any Shell stations in your area, you might check with them.

Onward and upward,
airforce

There's a station not far from the shop that sells it. Problem is, it's at least .25 more a gallon, and I drive a lot. Damn Gov has me too strapped most times to spare it.

There is one just outside Portland which has it in one of the rich neighborhoods. It is the fill-up spot for the part time hot rodders and now I am thinking of getting a few cans of it for the survival retreat. I would guess that's the stuff to use in snowmobiles and motorcycles which are more sensitive to bad gas.

Use pure gas for chainsaws, mowers, generators, tillers etc. You more than save the extra expense for the fuel, in repair bills.

The Station in Everett is not a Brand name. It has a pumps in front of a Stop & Rob on Broad way.

The chesapest 87 octane was about $3.50+ and the other grades were over $4 a gallon. A friend of mine get his Chain saw gas in Marysville and I think Snohomish. There is a racing fuel place Near the Monroe speedway. By the airport? PM me for the other two places.