The summer driving season kicked into high gear this week, as a projected 35.5 million Americans took to the roads to celebrate the Independence Day holiday.
Motorists took advantage of lower prices at the pump. The national average price for regular grade gasoline was $3.36 Friday, up a penny for the week, yet down 21 cents from month-ago and year ago prices, respectively. However prices remain 75 cents lower than the record high of $4.11 set four years ago next week.
But will this trend continue? Prices began to creep slightly higher this week, ending a streak of 78 days which saw prices drift from $3.91 per gallon on April 16 to $3.33 per gallon on July 3.
Crude oil saw an up and down week, yet never moved out of the $80-range amid national and international economic drivers. Growing tensions between Iran and the west continue to keep a floor under oil prices. Iran has threatened to destroy U.S. military bases across the Middle East and target Israel within minutes of being attacked, Iranian media reported on Wednesday, as Revolutionary Guards extended test-firing of ballistic missiles into a third day. In addition, an 11-day strike in Norway’s oil sector, which has slowed shipments from the world’s eighth-largest exporter, could drag on for weeks, a labor union said on Wednesday after a second round of talks with employers failed to produce a deal over pensions. A weak U.S. jobs report caused concern about global economic growth and ultimately oil demand. The commodity fell 3 percent on Friday immediately after the U.S. Labor Department released June nonfarm payroll figures that fell short of expectations for job creation. Nonfarm payrolls grew by 80,000 last month (less than expected), the Labor Department said Friday. The nation’s unemployment rate remained unchanged at 8.2 percent. Crude oil lost $2.77 Friday to settle at $84.45 a barrel, down 0.6 percent for the week.
There was good news this week for crude oil and gas prices in the Mid-Atlantic region as The Carlyle Group LP and Sunoco Inc. announced this week that they have agreed to form Philadelphia Energy Solutions, a joint venture that will enable the 330,000 barrel per day (bpd) Philadelphia refinery to continue operating. The refinery, the oldest continuously operating one on the East Coast comprising 24 percent of the refining capacity on the East Coast, was originally scheduled for shutdown in August of 2012. AAA believes this venture is a win-win for motorists and the economy.
In its weekly report, the Energy Information Administration reported the nation’s crude oil stocks dropped 4.3 million barrels to 382.9 million barrels. Gasoline stocks rose 200,000 million barrels last week to 205 million barrels. Gasoline demand rose by 155,000 bpd, just enough to push the weekly total to 9.001-million bpd. Overall petroleum demand numbers are fairly impressive at 19.6 million bpd, up 537,000 bpd for the week and 369,000 bpd above last year. The four week snapshot of demand was calculated at 19.167 million bpd, and that is up 179,000 bpd from the same slice of 2011.
“As motorists return from the Independence Day holiday they are being met with slightly higher prices at the pump, perhaps a surprise for some who got used to nearly three months of declines,” said Martha M. Meade, Manager of Public and Government Affairs for AAA Mid-Atlantic. “Crude oil, and in turn gas prices, gained upward momentum this week, leaving many to wonder if we have seen the summer low for 2012. Analysts believe we very well may have, as they now project prices will hover close to where they are now or just a bit higher, barring any hurricane or international oil disruptions in the coming months, both of which would send prices higher quickly.”
Gas prices ended a 78-day downward trend last week, leaving many to wonder if we may have seen the summer low for 2012. Tom Kloza, Oil Price Information Service (OPIS) chief oil analyst and AAA partner, believes this may be the case, noting prices could have bottomed out for July and August. Kloza predicts gas prices will move lower after Labor Day when the summer driving season ends, but in the meantime he suspects to see “what we see now or just a little bit higher.” Other factors that could disrupt crude oil and ultimately send gas prices higher are potential hurricanes and tension in the Middle East, both of which could heat up in the coming months. “We’ve probably bottomed out at least for the next couple of months,” said Kloza, “although it may be a very adventuresome summer.”
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