Since reaching a recent peak of 3.94 gal on 2 April , the average retail price US drivers paid for gasoline has fallen for 12 weeks in a row to $3.44 gal, according to EIA's weekly motor fuel survey.

The drop in gasoline prices largely reflects the decline in crude oil prices (see chart above), which have historically comprised the biggest part of the pump price.

The national average price for regular unleaded gasoline fell 0.50 gla over the 12-wk period, while the spot prices for West Texas Intermediate (WTI) Crude Oil declined the equivalent of 0.63 gal and Brent Crude Oil fell the equivalent of 0.81 gal. WTI and Brent are among the World's leading Crude Oil pricing benchmarks.

If Crude Oil price changes are fully passed through to consumers, for every $1 bbl change in Crude Oil prices, consumers could expect to see a 0.2-0.04 gal change in retail gasoline prices.

However, EIA analysis indicates that generally about 50% of the Crude Oil price change is usually passed on to consumers at the pump within 2 wks, and 80% is generally passed on within 4 wks.

Gasoline prices are also sensitive to conditions affecting particular regional markets, such as significant refinery outages on the West Coast this spring that led to higher prices in that area.

The price of Crude Oil accounts for about 67% of the retail price of gasoline.

Refining costs, distribution and marketing costs, and state and federal taxes make up the rest of the retail gasoline price. Pump prices vary by region, with some drivers paying more or less for gasoline than the national average depending on where they live.

Concerns that a weak global economy will lead to reduced petroleum demand has contributed to lower Crude Ooil prices.

However, part of the reason retail gasoline prices have not dropped as much as Crude Oil prices is that US gasoline demand has started to show some growth in recent months.

During Q-1 of Y 2012, monthly EIA data shows US gasoline demand was down about 1.4% from Q-1 of last year.

But, since the gasoline price peak, weekly EIA data indicate that gasoline demand has started to strengthen, with demand down only 0.9% in April compared to a year earlier and up by 0.2% in May.

The current 12-wk drop in gasoline costs is the 2nd-longest period of declining pump prices recorded by EIA's weekly fuel price survey since the drop at the end of Y 2008, when pump prices fell for 15 straight weeks.

Paul A. Ebeling, Jnr.

Paul A. Ebeling, Jnr. writes and publishes The Red Roadmaster's Technical Report on the US Major Market Indices, a weekly, highly-regarded financial market letter, read by opinion makers, business leaders and organizations around the world.

Paul A. Ebeling, Jnr has studied the global financial and stock markets since 1984, following a successful business career that included investment banking, and market and business analysis. He is a specialist in equities/commodities, and an accomplished chart reader who advises technicians with regard to Major Indices Resistance/Support Levels.