Temperatures weren’t the only thing on the rise throughout the Mid-Atlantic region this week. After dipping down to a low of $3.54/gallon on June 30 (following an early-May peak of $3.98/gallon), gas prices continued their upward climb for the third straight week. The national average for regular grade gasoline rose to $3.70 Friday, up 3 cents from last week, up 7 cents from a month ago and 98 cents higher than prices a year ago. Despite recent gains, gas prices remain 41 cents below the all-time record high of $4.11/gallon set in July 2008.
Crude oil crossed the $100/barrel threshold during trading on Thursday before settling slightly below the triple-digit mark, an impressive comeback after the commodity tumbled more than 20 percent between the end of April and the end of June on the heels of disappointing global economic news. At its highest level in about a month, crude oil has responded positively to positive developments in the Greek debt crisis and movement in the debate over extending the U.S. debt ceiling by the August 2 deadline. In addition to a weak U.S. dollar, crude oil was also supported by some signs that U.S. economic recovery has begun showing signs of strength, with jobless claims in line with expectations and the Federal Reserve Bank of Philadelphia’s economic index for July rose to 3.2 – above the forecast from economists and marking an impressive rebound from a negative reading last month. Crude oil closed the week at $99.87 Friday, a six-week high.
In its weekly report, the U.S. Energy Information Administration (EIA) data showed crude stocks dropped 3.7 million barrels to 351.7 million barrels. Gasoline stocks rose 800,000 barrels to 212.5 million barrels. Gasoline demand for the past week was flat, up 12,000 barrels per day (bpd) t 9.028 million bpd. The four-week average for gasoline demand remained 2.2 percent behind the same time last year.
“Motorists filling up their tanks this week were faced with a double whammy – excessive heat and rising gas prices,” said Martha M. Meade, Manager of Public and Government Affairs for AAA Mid-Atlantic. “As temperatures reached triple-digits in many areas, gas prices rose for the third straight week, a one-two punch as the summer driving season moves into its second half. Analysts continue to believe gas prices will remain below $4 per gallon in the near-term, barring any unforeseen natural or economic event, ranging from $3.50 to $3.75 over the next month.”
Oil prices may gain some clarity over the next few weeks as a number of issues start to be resolved. One of the first is the Greek debt crisis (a settlement was tentatively reach last week and proved to advance crude oil prices briefly above the $100/barrel mark.) The larger European sovereign debt issue remains, as well as resolution of the U.S. debt crisis, both of which will impact currency values and hence the price of oil. Also China used less crude oil in June than anytime in the past nine months but why this happened is the subject of some debate that may be clarified soon. China’s government has been raising interest rates to curb inflation and some argue this will lessen oil demand. Whether or not crude oil remains in its recent $90 to $100/barrel range remains to be seen, but some analysts believe only two things can knock the commodity out of this range – a hurricane headed to the U.S. Gulf Coast or August 2 comes and there’s no agreement on the U.S. debt ceiling.
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