Prices at the pump continued their upward climb, although double digit weekly spikes have eased. Gas prices have climbed every day for the past 29 days, climbing 7 cents this week to a national average of $3.64 per gallon on Friday. In the past month, prices have jumped 35 cents and since February 1 prices have increased 18 cents. The national average price remains 12 cents above year ago prices, making prices the most expensive ever for this time of year.
Crude oil prices, the biggest factor in determining gas prices (crude oil makes up nearly 70 percent of a gallon of gasoline) continued to hover in the $95 to $97 per barrel price range this week. While supported by positive economic data from the U.S. and increasing domestic inventories, crude oil was negatively affected by disappointing economic data from Europe. Data showed US unemployment claims fell more than expected, indicating signs of economic recovery and therefore increased demand. However, European data dampened expectations for increased demand as Germany, France and Italy (the three biggest countries in the euro zone) saw their economies shrink more than expected, and as a whole euro zone economic output fell more than expected during the last quarter of 2012. Investors are also watching the Middle East, specifically Iran, for any potential impact on crude oil prices. Crude oil settled at $95.86 Friday, a five-session.
In addition to the price of crude oil, gas prices have also been affected by seasonal maintenance work at refineries, temporarily reducing gas supplies, and financial market speculation, where investors believe demand for oil will rise which further inflates prices.
In its weekly report, the Energy Information Administration (EIA) data showed crude oil stocks rose by 560,000 barrels to 372.2 million barrels. Gasoline stocks fell by a modest 803,000 barrels to 233.2 million barrels, which equates to some 1 million barrels above last year. U.S. crude production hit 7.067 million barrels per day (bpd), a level not seen since mid-December 1992. In terms of demand, the EIA report shows nationwide gasoline demand dropped 11,000 bpd last week (to 8.404 million bpd), but nearly 40 days into 2013, year-to-date compilations show a 3.8 percent increase versus 2012. However, total petroleum demand surged back above 19 million bpd after some autumn and winter weeks that saw demand in the 18-million-bpd range. If these demand readings are accurate, it could mean that the economy is picking up steam.
“Prices at the pump continue to rise, although the double-digit weekly increases have eased a bit,” said Martha M. Meade, Manager of Public and Government Affairs for AAA Mid-Atlantic. “Since mid-January, the price of fuel has been propelled higher by more expensive crude oil, but more notably by regional refinery issues and the approaching switchover to summer-blend gasoline. As temporary production concerns are addressed, AAA expects price increases to slow. Based on this expectation, the national average is likely to increase through April, however, it is expected that it will peak this spring at a lower price than in 2011 ($3.98 on May 5) and 2012 ($3.94 on April 5 and 6).”
The recent surge in gas prices has motorists and analysts alike wondering what to expect at the pumps this year. In its Short-Term Energy Outlook (STEO) report, the EIA notes it expects that falling crude prices will contribute to a decline in the national annual average regular gasoline retail price from $3.63 per gallon in 2012 to $3.55 per gallon in 2013 and $3.39 per gallon in 2014, about 11 cents per gallon and 4 cents per gallon higher than forecast in last month’s STEO, respectively.
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