Despite holding at historic highs for the month of January, gas prices have stabilized over the past few weeks, yet some wonder if this is just the calm before the storm for gas prices during the first half of the year.
The national average for regular grade gasoline inched up a penny this week to $3.39 per gallon Friday. Prices are 15 cents above month ago prices and 29 cents above year ago prices, yet remain 72 cents below the all-time record high of $4.11 set in July 2008.
Crude oil prices pressed higher early in the week following a European Union agreement to embargo Iranian oil in stages by July 1. Iran countered by threatening to stop oil exports to the EU ahead of the imposed embargo (the EU accounted for 18 percent of Iranian crude oil sales in the first half of 2011). European debt concerns, notably in Greece, also remain at the forefront. Crude oil was also supported by the Federal Reserve’s decision to extend its low interest rate policy into 2014, weakening the U.S. dollar, yet indicating positive economic expansion could gain momentum in the U.S. (the world’s top oil consumer), likely increasing demand. Although after a mid-week winning streak, a weak dollar and some disappointing economic data from the U.S. showing that the economy grew by less-than-expected in the fourth quarter sent crude oil to close lower Friday, at $99.56 after trading above $100 per barrel for most of the week.
In its weekly report, the Energy Information Administration (EIA) showed the nation’s crude oil stocks rose by 3.6 million barrels to 334.8 million barrels, far more than analysts expected. Gasoline stocks dropped 390,000 barrels, to 227.1 million barrels. Demand for oil dropped 4 percent. Gasoline demand over the last four weeks showed a 6.4 percent decline over the same period a year ago, a slump typically associated with harsh winter weather.
“International events, especially the volatile climate in the Middle East, continue to push crude oil prices higher, which leads to increases in prices at the pump,” said Martha M. Meade, Manager of Public and Government Affairs for AAA Mid-Atlantic. “Motorists are in for potential record-setting gas prices during the first half of the year, according to many analysts, with prices likely to break through the $4.00 per gallon mark this spring.”
Most analysts agree gas prices will reach record high prices during the first half of the year. Prices typically springboard from January lows, however, this January’s prices have set record highs for the month. Many forecasts indicate we could see $4.00 per gallon or higher by spring, depending on volatility of the domestic and international markets, unpredictable geopolitical events around the world, refinery outages or closures, and weather events.
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Chris Graham
