Prices at the pump continued their relentless upward movement this week, despite a slight retreat in the oil markets. The national average price for regular grade gasoline jumped a penny this week to $3.94 per gallon Friday and remains 18 cents higher than month ago prices, 21 cents higher than a year ago and within 17 cents of the all-time record high of $4.11 per gallon set in July 2008. Gas prices are within 4 cents of last year’s high of $3.98 reached on May 4.
Crude oil saw two straight days of losses mid-week, dropping more than 2 percent Wednesday to a 7-week low after a government report showed U.S. crude inventories rose more sharply than expected last week (9.0 million barrels versus expectations of a 2.2 million barrel build). A strengthened U.S. dollar also pressured oil prices downward, making the dollar-based commodity more expensive for consumers using other currencies. Prices recovered slightly Thursday, supported by concerns over Iranian oil and positive economic data out of China. Despite mid-week losses, crude oil closed sharply higher Thursday at $103.29 per barrel, prompted by a drop in U.S. jobless claims to the lowest level in nearly four years and uncertainty about supply disruptions. U.S. markets are closed Friday in observance of the Easter holiday.
In its weekly report, the Energy Information Administration (EIA) showed the nation’s crude oil rose by 9.0 million barrels to 362.4 million barrels – nearly four times expectations of a 2.2 million barrel build. The inventory rise put stocks at their highest since June 2011 and 4.7 million barrels above the year-ago period. Gasoline stocks dropped 1.5 million barrels to 221.9 million barrels, likely due to winter blended gasoline moving out of the system. Gasoline demand is in a slow recovery, as last week saw demand inch up by 73,000 barrels per day (bpd) to 8.783 million bpd. Last week’s implied demand was about 100,000 bpd less than the same week last year, and the four-week average 3.8 percent behind last year.
One key factor keeping upward pressure on gas prices has been refinery concerns. However, indications this week show that northeastern refineries may not be quite as limited as previously predicted. Early this week multiple sources reported that several buyers are interested in operating both the Sun Philadelphia refinery (set to close on July 1) as well as the ConocoPhillips refinery that shut down last October. Both of these refinery closures have kept upward pressure on gasoline prices, especially in the northeast, and if a buyer is indeed found it would likely remove some of the premium in prices due to expected tight supplies.
“As nationwide gas prices climb ever-closer to last year’s high and the $4.00 per gallon mark, motorists are left wondering how long they’ll have to endure this pain at the pump,” said Martha M. Meade, Manager of Public and Government Affairs for AAA Mid-Atlantic. “We’re likely to break through these gas price milestones in the coming days, however, the question of how high prices will climb and for how long remains to be seen. One thing that is certain, with the typical peak driving season just weeks away, motorists (and analysts alike) will be watching and wondering as spring (driving) fever catches on.”
Analysts believe gas prices in the Northeast could see double digit increases in the coming weeks. Tom Kloza, chief oil analyst with the Oil Price Information Service (OPIS) noted that wholesale gasoline prices “went ballistic” in the Chicago area last week as suppliers switched to summer blends of gasoline, designed to burn more cleanly to reduce smog levels during the intense heat of May, June, July and August. After Chicago, price jumps are likely in the Northeast, the very place where some big refineries that make summer gasoline blends have been shuttered. Kloza figures these areas may be facing a jump of 15 to 25 cents a gallon from current levels in the coming weeks.
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Chris Graham
