Minnesota gas prices bust through $4 level

The price of a gallon of gasoline hit a shocking level overnight. In the Twin Cities, several chain gas stations — mostly in the outer ring — raised their prices to between $4.09 and $4.19 a gallon. That’s about 20 cents more overnight, 60 cents in the last two weeks, and $1.20 since January. At many stations, prices rose into the $4 range yesterday afternoon, then fell overnight into the $3.90 area.

What’s going on here?

“As we head into Memorial Day, drivers are experiencing the lowest gasoline prices since 2008,” CNBC says today, while noting that demand is relatively low and supplies are abundant.

Meanwhile, the Labor Department issued its wholesale price for April, pointing to low energy prices.

The Labor Department said that the bulk of the decline was driven by energy prices, which fell 2.5% on the month. These prices have been falling around the world among as the result of weakening demand and of indications that fast- rising U.S. oil production will greatly boost global supply in the coming years.

The decline in energy prices, in turn, was led by gasoline prices, which fell 6% in April. The U.S. Energy Information Administration has forecast demand for gasoline in the spring-summer driving season will fall to a 12-year low as the result of high unemployment, changes in driving habits and improvements in vehicle fuel efficiency.

The EIA, the government oil monitor, also proclaims good news:

Falling crude oil prices contributed to a decline in the U.S. regular gasoline retail price from a year-to-date high of $3.78 per gallon on February 25 to $3.52 per gallon on April 29. EIA expects the regular gasoline price will average $3.53 per gallon over the summer (April through September), down $0.10 per gallon from last month’s STEO. The annual average regular gasoline retail price is projected to decline from $3.63 per gallon in 2012 to $3.50 per gallon in 2013 and to $3.39 per gallon in 2014. Energy price forecasts are highly uncertain, and the current values of futures and options contracts suggest that prices could differ significantly from the projected levels.

Usually, there is a relationship between the price of oil in the U.S., and the price of a gallon of gasoline. In the last few weeks, that has not been the case.