WASHINGTON (POLITICO) - Motorists hitting the highways over the Independence Day holiday are paying the lowest prices at the pump they've seen all year -- but turmoil in Egypt and other trouble for the oil markets mean the good times may not last.
Some of the steepest drops have been in the Midwest, where retail gasoline prices tumbled by $1 per gallon since the beginning of June as refineries that had been shut for maintenance came back on line.
But rising tensions in Egypt are worrying oil traders and helped push U.S. crude prices above $101 a barrel to the highest level in 14 months Wednesday. On Thursday they leveled off slightly but held at around $101.
Egypt may not produce much oil, but it controls the Suez Canal, a key choke point for oil tanker traffic in the Middle East -- and any hint of shipping delays will ripple down to gasoline prices quickly. Even though U.S. oil production is climbing at a record pace, oil prices are still set by the global market.
The Energy Department's statistical arm, the Energy Information Administration, calls the Suez and Egypt's SUMED pipeline "strategic routes" for oil shipments to Europe: Together, the two move more than 2 million barrels of oil per day from the Red Sea to the Mediterranean.
Still, the U.S. has a relatively new advantage thanks to its boom in oil produced from shale: It has plentiful supplies of home-grown fuel to at least help cushion the blow.
The EIA said earlier this year that U.S. crude oil production is likely to exceed imports by 2 million barrels a day by the end of next year, largely because of rising output in North Dakota and south Texas.
Without the domestic boom, "imagine what the price would be given the turmoil in Egypt and Syria," said Charles Drevna, president of the industry group American Fuel & Petrochemical Manufacturers. "What's tamping that spike down is the fact that we have increased production by 2 million-plus barrels of oil over the last five years."
The national average gasoline price is still well above the $3.33 per gallon seen a year ago, and not too far away from the $3.61 average from two years ago, when Obama opened the Strategic Petroleum Reserve to keep supplies flowing during disruptions to Libya's oil production. But the price spike earlier this year means that the pain at the pump is ebbing now, not rising.
Still, a harbinger of upcoming price hikes can been seen in the financial futures market, where gasoline prices jumped by more than a nickel a gallon on Wednesday. And energy traders have yet to factor in the impact of the Atlantic hurricane season, which traditionally sees the tropics ramping up in August, generating storms that can toss around oil platforms in the Gulf and force the massive refineries in Louisiana and Texas to shut down.
Then again, drivers have reason to enjoy the price slump for now.
"Rising gasoline supplies have pushed average prices nationally below the psychologically important level of $3.50 per gallon just in time for one of the busiest travel periods of the year," Avery Ash, an AAA spokesman, said in a statement. "While such relatively small savings are probably not worth celebrating, millions of Americans will be relieved to save a little extra money as they travel for Independence Day."
The Independence Day holiday tends to be one of the busiest travel periods of the year, but nationally, people are consuming less gasoline than in years past, according to AAA's Michael Green.
AAA projects that 40.8 million Americans will travel more than 50 miles this holiday weekend, down from 41.1 million last year, with more than four out of five traveling by car. The decrease in travelers, as well as the proliferation of more fuel-efficient vehicles, is trimming that gasoline demand, Green said.
And people visiting Washington to watch the fireworks on the Mall might see some symbolic relief as well: The Watergate Exxon station, which long offered the most shockingly high gasoline prices in the city and provided dramatic backdrops for news reports on pain at the pump, closed late last year. It has been replaced by a Valero-branded station with relatively normal gas prices.
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