Prices at the pump increased slightly this week amidst national and international economic volatility. The national average for regular grade gasoline reached $3.71 Friday, up a penny from last week, up 17cents from a month ago and 97 cents higher than year-ago prices. Gas prices remain 40 cents below the all-time record high of $4.11/gallon set in July 2008.
Crude oil trended downward this week as traders and investors awaited a resolution to the U.S. debt situation ahead of the August 2 deadline to avert an unprecedented debt default by the world’s largest economy. Also contributing to the downward trend was the relative strength of the U.S. dollar and virtually flat gross domestic product (GDP) data. Oil did see brief bumps due to news from the U.S. Labor Department showing applications for unemployment benefits fell by 24,000 to 398,000 last week, the lowest level since April, and news from the housing markets that previously owned home sales rose unexpectedly in June, both indicators that demand for oil could be on the rise. Crude oil closed at $95.70 Friday, down 4 percent on the week.
In its weekly report, the U.S. Energy Information Administration (EIA) data showed crude stocks rose 2.3 million barrels to 354 million barrels, ending seven consecutive weeks of declines. Gasoline stocks rose 1 million barrels to 213.5 million barrels. The EIA also reported total petroleum demand was 18.426 million barrels per day (bpd), 428,000 bpd lower than the previous week and 1.2 million bpd below the same week in 2010. Petroleum demand for the past four weeks totaled 18.756 million bpd, down 2.9 percent from last year. Gasoline demand for the past week dropped below 9 million barrels per day (bpd) to 8.99 million bpd.
“Despite mid-summer increases, gas prices remain 10 cents below where they were at the start of the summer driving season (Memorial Day weekend),” said Martha M. Meade, Manager of Public and Government Affairs for AAA Mid-Atlantic. “The upward trend in recent weeks is directly related to the upward movement of crude oil prices, which have been affected by national and international financial situations. As some of these issues are resolved, especially the U.S. debt crisis, analysts believe crude oil, and ultimately gas prices, will gain some clarity. However, a default would likely mean higher crude prices as the dollar weakens against foreign currencies.”
Tropical Storm Don made landfall along the Texas coast Saturday, causing a shut down of 300,000 barrels a day or 6.8 percent of oil production from the Gulf of Mexico, home to 31 percent of the U.S. oil output. Such an interruption in oil production, albeit relatively small and not prolonged, will likely lead to a bump in oil prices in the short-term.
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