Gas prices continued their steady climb this week, coming within a nickel of last year’s high of $3.98 per gallon (reached in early May).
The national average price for regular grade gasoline rose 4 cents this week to $3.93 per gallon Friday. Prices remain 20 cents higher than month ago prices, 31 cents higher than a year ago and within 18 cents of the all-time record high of $4.11 per gallon set in July 2008.
Analysts believe prices will top $4.00 per gallon in the coming week or so and likely top the all-time record high well in advance of Memorial Day weekend, the traditional start of the summer driving season.
Crude oil prices leveled off throughout the week on signs that the U.S. and other countries could soon release emergency crude oil reserves to keep prices from rising further, balancing out concerns about a loss of Iranian oil. Also weighing on oil prices were signs the global economy may be slowing, therefore driving demand down further. The commodity ended at a six-week low Thursday, following word from Saudi Arabia’s oil minister saying the kingdom would be able to increase oil production to counter high prices. Although prices recouped some losses Friday, crude oil settled at $103.02 at Friday’s close, down nearly 4 percent on the week. Though oil has seen three consecutive weekly losses, it posted a quarterly gain of 4.2 percent.
In its weekly report, the Energy Information Administration (EIA) showed the nation’s crude oil stocks rose by 7.1 million barrels to 353.4 million barrels. Gasoline stocks surprisingly dropped 3.5 million barrels to 223.4 million barrels. Oil demand showed a one-week jump of 530,000 barrels per day (bpd), yet remains 401,000 barrels below the same week last year. Gasoline demand rose to 8.710 million 8.379 bpd, a high not seen since late December 2011.
Also this week, the Federal Highway Administration reported that after almost a year of declines, the latest data on U.S. road use show that drivers are using their vehicles more than they did a year ago. Improving economic conditions for both businesses and consumers are likely behind at least some of that rise in driving, but increasing vehicle fuel efficiency appears to be working against gains in U.S. gasoline demand. The Federal Highway Administration reported increases in vehicle miles traveled (VMT) of 1.1% in December and 1.6% in preliminary January data compared to the same months a year earlier. The Northeast showed the strongest move up in January (4.6%). Among the 10 most-driven states, Pennsylvania rose the most, climbing 5% year-on-year. It should be noted that some of the year-on-year VMT gains in recent months may be due to weather distortion. The 2010-2011 winter had too much traffic- suppressing snow and 2011-2012 showed a striking lack of it. But even if one omits the previous year in comparisons, the most recent months show multi-year strength. December 2011 VMT are the highest for the month since 2006 and January 2012 VMT are the highest for that month since 2009.
“Gas prices are within pennies of last year’s high ($3.98 per gallon) and the all-time high of $4.l1 set nearly three years ago,” noted Martha M. Meade, Manager of Public and Government Affairs for AAA Mid-Atlantic. “It’s likely we’ll see $4.00 per gallon gas in the coming days, with the potential to set a new record high. In the Mid-Atlantic region, gas prices could continue to climb through June if a potential Sunoco refinery closure in Philadelphia significantly tightens supplies of gasoline along the East Coast. Motorists are undoubtedly hoping prices peak and fall sooner rather than later, but unfortunately only time will tell.”
Motorists will continue to feel the pain at the pump in the coming weeks. Right now, Americans are spending about $1.37 billion each day on motor fuel. Oil Price Information Service (OPIS) chief analyst Tom Kloza expects the daily spending to peak at between $1.5 billion and $1.6 billion, given his expectations for gasoline prices topping out at the $4.05-$4.25 range nationally.
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