Motorists had to dig a little deeper this week to fill up their tanks as gas prices rose for the second consecutive week, despite dropping more than 20 cents in the past eight weeks to the most recent low of $3.54 on June 30. The national average for regular grade gasoline rose to $3.67 Friday, up 8 cents from last week, yet 31 cents below their May 5 peak of $3.98/gallon. Three years ago this week gas prices reached an all-time record high of $4.11/gallon.
Economic worries hurt crude oil late-week following week-long volatility due to concerns about the U.S. deficit and Europe’s debt. After trading at over $98 a barrel mid-week on positive U.S. jobs and retail sales data, the commodity fell $2 Thursday following a warning from Moody’s Investors Service that it might strip the U.S. of its gold-plated credit rating if the $14.3 trillion limit on the country’s borrowing was not raised. S&P followed suite with a warning that it could cut the U.S.’s prized triple-A rating within the next 90 days if a deal is not struck. In addition to U.S. economic concerns, lingering worries about the euro zone’s debt crisis continued to keep investors cautious. Also this week, the Federal Reserve hinted more stimulus might be coming if the economy continues to weaken. Despite late-week losses, crude oil rose on Friday to close at $97.24, retaining a big portion of gains recouped after prices fell to four-month lows following the June 23 announcement from the International Energy Agency of a coordinate move to release 60 million barrels from members’ emergency reserves.
In its weekly report, the U.S. Energy Information Administration (EIA) data showed crude stocks dropped 3.1 million barrels to 355.5 million barrels. Gasoline stocks dropped 840,000 barrels to 211.7 million barrels. Gasoline demand fell 293,000 barrels per day (bpd) to 9.016 million (bpd), 140,000 bpd behind the same week last year.
“As the summer driving season approaches the mid-way point, motorists find themselves digging a little deeper when filling up at the pump as gas prices rose for the second straight week,” said Martha M. Meade, Manager of Public and Government Affairs for AAA Mid-Atlantic. “Yet prices remain 30 cents below the early-May peak and analysts caution (barring any unforeseen financial crisis or natural disaster) we are not headed to $4.00 per gallon gas prices this summer, but rather prices should remain below $3.75 per gallon through July and August.”
The EIA sees a deepening European debt crisis and slowing economic growth in China prompting reductions in forecasts for growth in global oil consumption. The top U.S. energy forecasting agency says it sees demand growing less than previously forecast this year and in 2012 due to a more moderate economic recovery and higher fuel prices. In its new monthly outlook, the EIA cut its forecast for 2011 world oil demand growth by 270,000 bpd to a 1.43 million bpd increase this year. Oil demand in 2012 will rise 1.58 million bpd, about 10,000 bpd lower than it forecast last month. OPEC also said world oil demand would grow more slowly in 2012 because of a fragile global economy and increased decline in consumption in Europe. The EIA expects regular-grade gasoline prices will average $3.62 per gallon and $3.51 per gallon over the third and fourth quarters of 2011.
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