Gas prices continued to hold steady just three weeks into the new year, hovering at $3.29 on Friday, compared to the same three week period in 2012 where prices at the pump increased 10-plus cents per gallon. Friday’s national average price for a gallon of regular unleaded gasoline is 2 cents less than one week ago, 6 cents more than last month and 9 cents less than one year ago.
While prices have stabilized and even dropped in many places, there are a few states in the Northeast still paying more than last year (including Pennsylvania, New Jersey, and the District of Columbia) due to the supply aftereffects of Hurricane Sandy last fall. Barring any unforeseen circumstance that would affect crude oil prices, AAA anticipates the trend of below year-ago prices will continue.
After trading much of the week in the $90 to $95 per barrel range, crude oil crossed the $96 per barrel mark on Thursday, the highest price since last September. Rising prices came on the heels of positive U.S. economic news – U.S. jobless claims fell to the lowest level since January 2008 last week, the Labor Department said, and construction of new U.S. houses jumped more than 12% in December – both of which indicate the U.S. economy continues to grow and demand for energy will pick up. Positive economic growth reported from China in the fourth quarter, a sign of potential demand growth, also supported crude oil. Another factor sustaining crude oil prices this week is the Algerian hostage situation. Rebels had been holding hostages at a natural gas plant for much of the week when Algerian forces launched a raid to rescue the hostages, which turned deadly. Several hostages were killed and several remained unaccounted for. Traders are keeping a steady watch on the situation and the effect on the country’s and region’s stability. The country produces about 1.2 million b/d of crude oil. Crude oil at Friday’s close was $95.56 per barrel, up 2 percent on the week.
In its weekly report, the U.S. Energy Information Administration (EIA) data showed crude oil stocks dropped 951,000 barrels, opposite analysts’ expectations of a 2.2 million barrel build, to 360.3-million barrels. Gasoline stocks grew by 1.91-million barrels, less than analysts’ expectations of a 2.7 million barrel build, to 234.995-million barrels. Gasoline demand recovered by 310,000 barrels per day (bpd) to 8.32- million bpd. Despite a nominal increase in demand numbers, demand remains poor.
“Gas prices remain stable, even dropping in some areas, which is a welcome contrast to last year at this time when we saw double-digit increases to start the new year,” said Martha M. Meade, Manager of Public and Government Affairs for AAA Mid-Atlantic. “Late week crude oil increases due to domestic and international issues could impact prices at the pump slightly in the coming days. However, AAA believes prices at the pump will remain stable throughout the winter months ahead of the seasonal increase during the spring months.”
Eyes will remain on the Algerian hostage situation and potential turmoil in the region, and its impact on crude oil prices. While gas prices are expected to remain relatively stable for the remainder of the month and into February, such international conflict could send crude oil prices upward for the short-term and gas prices would likely follow suit. Should the situation resolve itself with minimal impact to crude oil prices, increased prices at the pump aren’t expected to rise significantly until early spring.
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