AAA: Gas prices highest in six years

As we approach the end of the first full month of the 2014 summer driving season, the national price for regular unleaded gas is $3.68 per gallon, which is the highest price for early summer in six years (prices topped $4 per gallon in July 2008).

The average price at the pump had increased for 12 consecutive days (through Monday) for a total of four cents per gallon, narrowing the gap between the current retail price and the 2014 peak of $3.70 per gallon reached on April 28. Friday’s average is unchanged from one week ago, three cents more than one month ago, and 15 cents more per gallon than a year ago.

After a run-up to a new nine-month high to end last week, crude oil prices inched slightly lower this week.  While the militant uprising in Iraq continues to capture headline space, most of the initial uncertainty appears to have already priced in.  Market attention now appears to be focused on the fact that the bulk of Iraqi oil production, which is isolated to the southern region of the country, has not been impacted by the ISIL (the Islamic State in Iraq and the Levant) insurrection.  Analysts note about 75 percent of Iraq’s oil supply and 90 percent of its exports are loaded in southern Iraq, where there are still no problems. In fact, loading data from the nation’s primary export terminal in Basra would seem to indicate that oil shipments are very near to what were 11-year highs in May.  Crude oil settled at $105.74 Friday, down nearly 1.5 percent on the week.

In its weekly report, the Energy Information Administration (EIA) noted that U.S. crude oil stocks rose 1.7 million barrels to 388.1 million barrels.  Gasoline inventories rose a modest 710,000 barrels to 215 million barrels.  Gasoline demand last week fell by 445,000 barrels per day (bpd) to 8.813 million bpd, and that figure was 82,000 bpd below last year. The concern will come over the next 10 weeks, representing the true crunch time in the driving season. Eight of the next 10 summer weeks in 2013 saw gasoline demand top 9 million bpd. These peak driving season weeks represent a consumption challenge in 2014, given more fuel efficient vehicles, less mobile young drivers, and an increase in telecommuting.

“Ahead of the Independence Day weekend, AAA expects motorists in most areas will pay the highest gas prices for the summer holiday since 2008 ($4.10),” said Martha M. Meade. Manager of Public and Government Affairs for AAA Mid-Atlantic.  “In recent years gas prices have declined in the weeks leading up to Independence Day, but this has not occurred this summer due to high crude oil costs resulting from violence in Iraq.  Although, AAA does not believe that high gas prices will have a significant impact on the number of people traveling, it could result in some consumers cutting back on dining, shopping or other trip activities.”

AAA Travel projects 41 million Americans will journey 50 miles or more from home during the Independence Day holiday weekend, a 1.9 percent increase from the 40.3 million people who traveled last year and a nearly 14 percent increase compared to the Memorial Day holiday weekend.  Automobile travel is projected to be at its highest level since 2007, with more than eight in 10 (34.8 million) celebrating their freedom with a road trip.  The Independence Day holiday travel period is defined as Wednesday, July 2 to Sunday, July 6.

AAA had previously predicted that the national average price of gas would fall 10-15 cents per gallon in June, but that now appears unlikely due to higher oil costs. This means that even though the national average has only increased a few cents per gallon since the Iraq violence intensified, drivers are likely to pay substantially higher gas prices than they would have otherwise.

CURRENT AND PAST GAS PRICE AVERAGES

Regular Unleaded Gasoline (*indicates record high)