AAA: Higher gas prices to start the summer driving season

AAA-LogoThe summer driving season started last weekend and motorists paid slightly more for gas at this time of year than in the previous two years ($3.66) – three cents more than in 2013 ($3.63) and two cents more than in 2012 ($3.64).  The national average price for a gallon of regular unleaded gasoline Friday is $3.66, even with one week ago.  Prices are three cents lower than a month ago and four cents higher than the same day a year ago.

Elevated global oil prices, driven by heightened tensions in key oil producing regions, have kept a relative floor under retail gas prices for motorists.  Oil markets are keeping a close eye on simmering geopolitical tensions, most notably those in Ukraine and Libya, for any developments that might impact global supply.  Last weekend Ukraine elected a new president, Petro Poroshenko, which some analysts had suggested would increase stability in the region.  In Libya, acting prime minister, Abdullah Al-Thinni, refused to hand over power to a newly elected premier after questioning his legitimacy.  Oil prices have been range bound throughout May, unable to top $105 per barrel or fall much below $99 a barrel.  This marks the fourth straight week that West Texas Intermediate (WTI) closed above the $100 per barrel threshold.  Crude oil settled at $102.71 Friday, down nearly two percent from a week ago.

In its weekly report, the Energy Information Administration noted that U.S. crude oil stocks returned to building inventories with a 1.7 million barrel jump to 393 million barrels following last week’s huge draw.  Gasoline inventories dropped 1.3 million barrels to 211.6 million barrels.  Gasoline demand topped the 9-million barrels per day (bpd) mark for the third straight week, checking in at 9.31 million bpd.  Last week’s demand figure represents a three-year high for gasoline demand and it marked the first May four-week average of better than 9 million bpd for the first time since 2011 as well.  The consistently strong demand could be tied to the “sugar rush” that goes with some nicer weather after what felt like a never-ending winter in a large portion of the country.

“Geopolitical tensions and four straight weeks of crude oil prices over $100 a barrel have caused prices at the pump to creep up in some areas,” said Martha M. Meade, Manager of Public and Government Affairs for AAA Mid-Atlantic.  “Seventy percent of a gallon of gasoline is made up of crude oil, so when crude oil prices go up motorists almost immediately feel the pain at the pump.  Unless crude prices start to recede, motorists can expect some stagnation in prices.”

As the summer driving season kicks into gear, AAA continues to believe gas prices have likely hit their peak and should decline into the summer.  Last year prices at the pump fell through the month of June, and then rose in July.  If geopolitical tensions ease and crude oil retreats, prices at the pump are likely to ease as well.  However, the six-month Atlantic hurricane season begins June 1 and although the National Oceanic and Atmospheric Administration (NOAA) is forecasting a near-normal or below-normal season this year, eight to 13 named storms have been predicted. Although, it takes one major storm causing supply disruptions to push crude oil, and in turn gas prices, higher.

 

CURRENT AND PAST GAS PRICE AVERAGES

Regular Unleaded Gasoline (*indicates record high)

 

 6/1/14Week AgoYear Ago
National$3.67$3.66$3.61
Virginia$3.47$3.48$3.38
Charlottesville$3.37$3.38$3.22
Norfolk Area$3.54$3.54$3.39
Richmond$3.40$3.41$3.37
Roanoke$3.37$3.38$3.26
Crude Oil$102.71 per barrel (at Friday’s close)$104.35 per barrel (5/23/14)$93.61 per barrel

(5/30/13)

 

 

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