Just days ahead of the official start of spring gas prices are at the highest point ever for this time of year and continue to climb toward the $4.00 per gallon mark this week, a trend expected to continue into the spring.
The national average price for regular grade gasoline stabilized somewhat this week, reaching $3.83 per gallon Friday, up 7 cents in the last week. Prices remain 31 cents higher than month ago prices, 28 cents higher than a year ago and within 28 cents of the all-time record high of $4.11 per gallon set in July 2008. Analysts continue to believe mid-March through mid-May will be a critical time for gas prices, which are expected to peak upwards of $4.00 per gallon (potentially as high as $4.25 per gallon nationally) before retreating.
Crude oil prices turned lower this week as bearish international economic news weighed on markets. Most notably, China reported an increased trade deficit and a slowing of export growth, both adding to concerns of an overall slowing of the Chinese economy. China is the world’s second largest oil consuming country, behind the United States. A slowing Chinese economy would be expected to consume less crude oil and products, which puts downward pressure on global prices. Additionally, crude oil futures are priced in U.S. dollars. When economies weaken overseas, the dollar strengthens and the price of oil becomes relatively more expensive. Oil futures subsequently become a less attractive investment, which exerts downward pressure on prices. The rising U.S. dollar, growing optimism over a U.S. economic recovery, and crude stock build offset support from geopolitical tensions in the Middle East. Mounting tensions between Iran and the West over the OPEC producer’s disputed nuclear program have elevated crude oil prices in recent months, up about 7 percent. Prices rose Friday, following government denials from the U.S. and the U.K. that they plan to release some of their strategic crude reserves. Crude finished the week at $107.06.
In its weekly report, the Energy Information Administration (EIA) showed the nation’s crude oil stocks rose by 1.75 million barrels to 347.45 million barrels, in line with a forecasted 1.7 million barrel build. Gasoline stocks fell 1.4 million barrels to 228.1 million barrels, slightly more than forecasts for a 1 million barrel decline. The EIA report also noted that energy demand remained weak in the U.S. Oil demand dropped 5.4 percent last week, while gasoline demand fell by 7.2 percent when compared with a year ago.
“Gas prices head into spring this week at the highest level ever to start the season, which is unsettling news for motorists as the typical peak driving season approaches,” said Martha M. Meade, Manager of Public and Government Affairs for AAA Mid-Atlantic. “As has been the case all year, gas prices continue to be influenced by various factors, especially in the Mid-Atlantic region. Crude oil prices, national and international economic news, geopolitical tensions, and refinery shutdowns have and will continue to play into gas prices throughout the spring months, as analysts continue to believe prices will peak upwards of $4.00 per gallon (perhaps as high as $4.25 nationally).”
March madness is likely to continue at the pumps in the coming weeks and well into spring, as analysts continue to believe gas prices will peak as high as $4.25 nationally before retreating. The gas price peak could come as soon as late-April or early-May, depending primarily on what develops in the crude oil market. Analysts continue to emphasize that once gas prices do peak, they shouldn’t stay at such levels for very long. In fact, many believe prices will retreat throughout the second half of the year.
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