AAA: Gas prices up for fourth straight week
So far this summer, gasoline prices hit a low of just under $3.33 a gallon on July 2, but have been steadily rising throughout the month. The national average price for a gallon of regular self-service gasoline was $3.49 Friday, up 4 cents for the week, yet down 11 cents from month-ago prices and 45 cents below the year-to-date peak price of $3.94 on April 5. Since the July 2 low ($3.33), the national average retail price has now increased for 23 of 25 consecutive days and has only declined for four days so far this month. This compares to July of last year when national prices rose 17 cents and increased for all but six days during the month.
In recent months gasoline prices have roughly followed the cost of crude oil, which rose well above $100 a barrel in February and March, only to fall back on weaker economic expectations around the globe. After dropping to $77.69 a barrel on June 28, oil prices jumped above the $90 per barrel mark, but have since dropped to the $87-a-barrel level. Global concerns, including sovereign debt issues in the euro zone, signs of slowing growth in China and bearish economic data in the U.S. have weighed on markets. In addition, geopolitical concerns with Iran have escalated in recent weeks sending crude oil prices upward. This week crude oil prices were boosted by a pledge by the European Central Bank to protect the euro zone from further debt crisis, as well as a drop in U.S. jobless-benefit claims (fell 35,000 to 353,000 claims, far lower than the forecasted 380,000 claims). Crude oil prices rose for a fourth straight day on Friday to settle at $90.13, on hopes for more stimulus from the U.S. Federal Reserve after data showed U.S. economic growth slowed in the second quarter as expected.
In its weekly report, the Energy Information Administration (EIA) reported the nation’s crude oil stocks rose 2.7 million barrels to 380.1 million barrels. Gasoline stocks rose 4.1 million barrels to 210 million barrels. EIA recorded overall petroleum demand of 19.076 million barrels per day (bpd) last week, up 651,000 bpd from last year. Gasoline demand inched up 32,000 bpd on the week and at 8.66 million bpd, 339,000 bpd behind last year. This week’s figure is more than 1 million bpd below the peak level for this week (2007) and one has to retreat to the year 2000 to find lower motor fuel demand at this stage of July.
Also this week, the EIA reviewed its status of East Coast refineries and has backed down from its dire predictions made in February about supply worries along the eastern seaboard. The worst case scenario evaluated in EIA’s (February) report has not come to pass,” the government agency says in its new study. Essentially the supply situation has changed following confirmation that the Carlyle Group would buy Sunoco’s Philadelphia refinery and keep it open along with Delta Air Lines’ purchase of Phillips 66’s Trainer, Pa., refinery. The news keeps over 500,000 bpd of refining capacity in play on the U.S. East Coast. EIA’s worse-case scenario had been predicated on both these refineries being shut down, combined with the closing of Phillips 66’s Marcus Hook refinery, which has since been acquired by Delta Airlines. EIA has reduced its supply gap from an estimated 420,000 bpd to just 50,000 bpd because of these developments.
“Gas prices have risen steadily since early July and might not retreat until after August,” said Martha M. Meade, Manager of Public and Government Affairs for AAA Mid-Atlantic. “That said, crude oil has returned to trade in the $80 per barrel range (down from the $90 per barrel range last week), which means prices at the pump should stay where they are for at least the time being.”
A rise in gas prices during the month of July has motorists wondering if the trend will continue into August. Prices at the pump have risen over 5 percent in the past month, yet remain nearly 6 percent below year-ago levels. Tom Kloza, Oil Price Information Service (OPIS) chief oil analyst and AAA partner, notes we typically see prices at the pump fluctuate during the summer months. However, Kloza says he’s “confident we’ll see a drop lower between Labor Day and Election Day.”