As I wrote a couple weeks back was likely, gasoline prices just rose above $2.50 per gallon nationwide. And since oil prices have kept increasing, the gasoline price has a bit further to rise. This has huge implications for our whole energy system.
Oil Above $67 Per Barrel
The early signs of economic stability and a weakening dollar have doubled the lowest price of oil reached last December (~$32.50). Last week’s EIA petroleum report showed US crude inventories falling 1.5%, but still significantly above average. Gasoline supply fell below average levels, but distillates and propane remained above average. With most petroleum inventories above average and recessionary low demand continuing for the next few months at least, it is hard to imagine the price continuing to rise much further in the short term unless production begins to fall on the low rig counts and prices.
Low Gasoline Storage Sends Wholesale Prices Up
Wholesale gasoline prices increased further over the past week, and are poised to send pump prices above $2.55 and potentially as high as $2.60 per gallon in the near future.
Rig Count Up for Oil, Down for Natural Gas
Another reason oil prices should slow down its increasing trend is the oil rig count is increasing on oil’s recent price recovery. The oil rig count climbed 3.9%, which may keep second half 2009 oil production from dipping below 5 million barrels per day. For natural gas, the rig count continues to fall – last week at a 1.1% rate. By this fall, natural gas production will probably slide below the 2008 rate and help prices climb 50+% toward the marginal cost of production of $7+ per MMBtu. Then again, natural gas prices could remain below $6 into 2010 if companies like GM and Chrysler continue to struggle mightily to sell their products.
The current oil price climb is dangerous for our economy unless we accelerate our deployment of efficiency and renewables. Stay tuned in the weeks ahead for more details on the increasing price of fossil fuels and the role it plays in our Sustainable Energy Transition.
Onwards-
Tags: 2009, gasoline, Natural Gas, oil prices