For the last couple of months, average national gasoline prices stopped their skid at ~$1.61 per gallon. But since early January, prices have been climbing back up. In the next few days, prices may hit $2 per gallon thanks to strong demand and slightly lower current and anticipated supplies reported today by the weekly US EIA petroleum analysis.
The AAA reports that regular gasoline is selling for $1.94 today nationwide. And wholesale gasoline futures markets rose 5+ cents at 1pm today to ~$1.30 per gallon. Wholesale gasoline usually sells for ~70-75 cents less than gasoline at the pump. So, we look poised to see $2 gas again within a few days.
But there is a possibility events stop the rise of US gas prices. News of even worse economic deterioration in the US and globally could lower wholesale prices and keep pump prices below $2. For instance, if European drivers decide they can’t afford to drive as much, their surplus gasoline may flood our market and prevent higher prices. That seemed to begin last week as gasoline imports rose 500,000 barrels per day to a level 50% higher than the same week last year.
But returning to the support for the last several week’s bullish trend, gasoline inventories fell 2.6 million barrels (Mb) to 217.6 Mb. This supply is 11.6 Mb (5%) below last year, though demand is just as strong. And many oil refineries are going into a maintenance period over the next few weeks which usually brings gasoline supplies down significantly.
Another factor which could support gas prices would be if OPEC does indeed fully comply with their agreed upon cuts this month. Some IEA data point to 80% compliance thus far. If OPEC doesn’t act according to their stated goals, crude prices could fall back toward $30 per barrel, especially with the petroleum weekly report’s news that US crude oil production is now 300,000 barrels per day above last year on new Gulf of Mexico fields coming online.
Bottom Line: This situation appears to be a recipe for $2 gasoline again soon. But a long-term trend in gasoline prices won’t reappear until the depths of our current recession are known — hopefully in the months rather than years ahead. All the while, focusing on efficiency can keep our demand from stressing current supplies and keep our energy bills down.
Tags: 2009, economy, gas prices, Oil