The premium of gasoline at the pump to futures prices has widened to almost $1 a gallon for the first time since 2012, foreshadowing further declines for motorists and bringing U.S. holiday travelers closer to $3 gasoline than they’ve been in four years.

Gasoline for November delivery slid to $2.2562 a gallon on the New York Mercantile Exchange at 12:22 p.m., 98.38 cents below the retail price posted by Heathrow, Florida-based motoring club AAA. That’s the biggest gap since October 2012, which was the last time the discount topped $1. The futures, which help dictate retail costs, have dropped about 40 cents in the past two weeks while prices at the pump are down 10 cents.

The widening spread indicates that filling stations have yet to match declines in futures, according to Michael Green, an AAA spokesman in Washington. The group has projected that retail prices will fall below $3.10 a gallon and may reach $3 by the time drivers hit the road for the end-of-year holidays.

“It’s possible that we see an average of $3 this year with futures so low and it only being early October,” Green said. “We wouldn’t be surprised if retail prices dropped another 20 cents a gallon by the time you load your car up for Thanksgiving” on Nov. 27.

Prolonged declines in gasoline futures typically take two to three weeks to translate into lower pump prices as individual gasoline stations adjust their pricing, Green said. U.S. retail prices averaged $3.24 a gallon yesterday, data compiled by AAA show. The last time the nationwide price was below $3 was in December of 2010.

Filling Stations

“If you’re the owner of a gas station, you’re paying lower wholesale prices now, but there’s no guarantee they’ll continue to drop,” he said. “They have little motivation to cut their prices unless futures remain where they are. Then some gasoline station owner will lower prices and competition will kick in and it’ll turn into lower prices for everyone.”

Gasoline is sliding as oil prices trade at the lowest levels since 2012. U.S. output of crude, which makes up about two-thirds of the cost of gasoline, has surged to a 28-year high as drillers pull record volumes out of shale formations from North Dakota to Texas. The domestic boom has contributed to a glut of light oil as global demand growth slows.

U.S. refiners are cashing in on cheaper domestic supplies by processing the most crude for this time of year since at least 1989, according to data from the Energy Information Administration, the Energy Department’s statistical arm.

Below $3

Gasoline prices in Missouri fell below $3 a gallon earlier this week, becoming the first state with an average under $3 since Jan. 23, AAA said Oct. 7. Almost 10 percent of U.S. stations were selling the motor-fuel for less than $3 a gallon at the time, the group said.

The EIA lowered its retail gasoline forecasts on Oct. 7, projecting that prices will bottom out at $3.14 a gallon in December, 4 cents lower than its previous outlook, T. Mason Hamilton, a petroleum markets analyst at the agency in Washington, said by telephone today.

“Of course that’s because of lower crude prices,” Hamilton said. “Crude oil consists of about 65 percent of the regular retail gasoline price.”

To contact the reporter on this story: Lynn Doan in San Francisco at ldoan6@bloomberg.net To contact the editors responsible for this story: David Marino at dmarino4@bloomberg.net Bill Banker.

Tags: driving, usa
Photo Credit: Cars drive now interstate 270 in the northeastern United States. Brad Clinesmith / Flickr