Many analysts see a decline in gas prices after a Memorial Day weekend peak – but we still have a ways to go both in terms of time and what we might be paying at the pump until then.
“So far this year oil prices have been driven by speculation, geopolitical unrest, natural disasters, a weak U.S. dollar and slowed domestic economic growth. As long as these variables are present, the oil market will remain volatile and subject to upward movement, with gas prices following suit. Crude oil stability, or even retreat, is the key to gas price declines,” said Martha M. Meade, manager of public and government affairs for AAA Mid-Atlantic.
Gas prices rose this week for the fifth straight week and continued their upward crawl toward the $4.00 per gallon mark. The national average price of regular grade gasoline was $3.91 Friday, within 9 cents of the $4.00 mark and 20 cents shy of the all-time record high of $4.11 a gallon in July 2008. Prices at the pump are up 6 cents from a week ago, 31 cents higher than month ago prices and $1.03 higher than year ago prices.
Analysts believe that a move past $4.00 a gallon will be met with a large pull back on driving.
Crude oil prices touched a 31-month high mid-week after Fed Chairman Ben Bernanke said record-low interest rates will remain in place, however, weak economic data showing that the U.S. economy grew at a slower rate during the first quarter, likely due to increased gasoline prices and curbed discretionary spending, caused oil prices to drop slightly before rebounding. A plunge in the U.S. dollar continued to fuel interest in commodities (oil).
In addition, increasing levels of unrest in oil-producing region of the Middle East and North Africa put upward pressure on crude oil prices. Crude oil closed the week and the month of April at $113.93, the highest level in 31 months. The commodity has risen for the eight consecutive months (up $7.21 or 6.8 percent in April), the longest stretch of monthly gains since the NYMEX introduced the crude oil contract in 1983.
In its weekly report, the U.S. Energy Information Administration data showed crude stocks increased 6.2 million barrels to 363.1 million barrels. Gasoline stocks fell for the 10th straight week by 2.5 million barrels to 205.6 million barrels, 18.1 million barrels below last year’s level and the lowest level since August 2009. Nationwide demand edged up slightly to 9.1 million barrels per day (bpd) and was likely moved due to an Easter “lift” last week.
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