Crude oil glut will drive gas prices lower

Bad news for world oil markets is good news for New Jersey drivers, as crude prices plummet.

With the price of crude oil going down this summer because of excessive supply, prices at the pump are likely to also trend downward.

"I think we will just see a slow drift to the downside for prices this month, and perhaps into next month," said Tom Kloza, global head of energy analysis for the Oil Price Information Service.

To put it another way, Kloza calls this a dress rehearsal for what looms in the fall for global markets: another round of very cheap oil and gasoline prices.

Kloza conceded that states like New Jersey see very high demand in July and early August. Sometimes, that high demand can translate into higher prices at the pump. But he also said world crude prices are "falling apart" right now, adding there's "clearly too much crude." He said crude oil prices had previously rebounded from about $42 in late January to about $62.

"They are falling apart because of China, which has a tumbling stock market, and is looking at less consumption, and they are falling apart to a certain extent because of Greece -- and not so much the worries about that country, but the worries about its cascading impact on European economies and some other economies that have ties with Greek banks," Kloza said. "They are falling apart because of Iran. Iran can throw another half-a-million barrels a day of crude oil on the market if they get this deal (a pending nuclear accord with the United States)."

So where does New Jersey stand right now?

"We are seeing average prices of about $2.59, but we are seeing the most competitively low prices probably around $2.35," Kloza said.

Is $2 per gallon gas on the horizon? It may be within the realm of possibility later this year, perhaps between Labor Day and Thanksgiving. Kloza said pump prices will drop, "but much more ambitiously low prices as we get into the fall."

That means you might eventually be able to get gas for less than $2, or get 10 gallons for $20 and be able to drive close to 300 miles on that amount.