Rising crude oil prices continue to push gasoline prices slightly higher with the Memorial Day holiday weekend less than one week away. The national average price for a gallon of regular unleaded gas rose to $3.62 Friday. This price is six cents more expensive than one week ago and even with prices from one month ago. This is the largest weekly increase since February. The national average has been less than the same date in 2012 for 76 straight days; however the year-over-year discount has narrowed to ten cents per gallon after widening to as much as 39 cents per gallon on April 18. Gas prices at this time last year were falling consistently and would eventually decline 82 out of 87 days for a total of 61 cents from April 6 to July 2. By comparison, the national average this year has increased for 12 straight days to the highest price in more than a month. With this in mind, it is likely that the year-over-year discount will continue to fade in the coming days.
Crude oil prices have risen since early April, despite ample production, which has pushed up gas prices. The recent upswing in oil prices is primarily due to a strengthened U.S. dollar, which is nearing a 10-month high, and evidence of slower U.S. economic growth, raising doubts about demand. A stronger dollar makes dollar-denominated commodities (such as crude oil) more expensive for other currencies. The U.S. economy showed signs of slowing in the second quarter, in addition to a spike in new claims for jobless benefits. In addition, concerns in Iraq and Libya about supply disruptions have also supported oil prices. Crude oil prices have risen from $86 per barrel in mid-April to about $95 per barrel. Crude oil settled at $96.02 Friday.
In its weekly report, the Energy Information Administration (EIA) data showed crude oil stocks dropped 600,000 barrels to 394.9 million barrels, but are above the upper limit of the average range for this time of year. Gasoline stocks rose 2.6 million barrels to 217.7 million barrels and are in the upper half of the average range. EIA stats suggest that the nationwide slump for motor fuel demand has accelerated, but there are still some regions affected by spring 2013 refinery maintenance issues. Overall U.S. gasoline demand dipped another 104,000 barrels per day (bpd) to a winter-like 8.341 million bpd. That is some 636,000 bpd below mid-May demand one year ago. Measured from a four-week average, gas demand is down 3.1 percent from last year. One has to go back to mid-May 2000 to find a lower four-week spring reading. More notably, U.S. year-to-date gasoline demand has now gone negative to 2012.
“Although gas prices have increased slightly in the past few weeks, motorists can expect to spend less at the pump this Memorial Day weekend than last year,” said Martha M. Meade, Manager of Public and Government Affairs for AAA Mid-Atlantic. “In fact, this will likely be the cheapest summer at the gas pump since the end of the recession, with analysts projecting prices will average between $3.20 to $3.40 per gallon by mid-summer.”
The upcoming Memorial Day holiday weekend marks the official start of the summer driving season. Anticipation for increased demand as the holiday weekend approaches typically sends prices higher, although analysts believe we won’t see the record setting summer gas prices we’ve seen in years past.
AAA Mid-Atlantic will release Memorial Day travel projections on Monday, May 20 at 2:00 p.m.
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Chris Graham
