On Friday the average price of a gallon of gasoline in the United States was $2.168. By Saturday morning that price had slipped by more than a penny to $2.152, according to data from AAA. Gasoline prices have now fallen every day for more than three months.
In the past month the price has dropped by more than $0.50 a gallon and, compared with last year, the price has tumbled by $1.16 a gallon. AAA has even better news for motorists:
Barring any significant fluctuations in the price of crude oil, the average price at the pump is likely to remain below $3.00 per gallon in 2015, although prices may see seasonal increases this spring as refineries undergo maintenance, or this summer as demand increases during the busy summer driving season.
The impact on the oil and gas industry is already being felt as exploration and production (E&P) companies cut their capital spending budgets. ConocoPhillips (NYSE: COP) has sliced 18% from its 2015 capital spending budget, and industry consulting firm Tudor, Pickering, Holt has determined that at least 40 publicly held North American-focused E&Ps have reduced their 2015 capex guidance since early December by an average 31% from 2014 spending levels.
The cut in capital spending is not expected to result in production cuts however. Tudor expects overall U.S. production to increase by 8% year-over-year in 2015. The cuts to capital spending will not be felt at the pump until production begins to decline.
Where the impact is being felt is in the drilling business, where firms like Helmerich & Payne Inc. (NYSE: HP) are already seeing drop-offs in rig counts and lower day rates for rigs. As current drilling contracts expire, the rig operators are not finding new customers for their services.