AAA: Gas Prices Hit 15-Month High

The first full week of the new year saw gas prices hit their highest level in 15 months and surpass last year’s high price. The average U.S. retail price for regular gasoline reached $2.73 on Friday, 8 cents higher than a week ago, 97 cents higher than a year ago and surpassing last year’s high of $2.70, reached October 30, 2009. Motorists are now spending $1.025 billion each day on gasoline.
As gasoline reached its highest level in 15 months, so did crude oil. On Wednesday crude oil hit a 15-month high of $83.52, extending a nearly $11 rally to a 10th trading session on expectations freezing temperatures across the U.S. would eventually cut into bulging crude stockpiles. Later in the week a slightly stronger dollar and signs of a tighter monetary policy in China, the world’s second largest energy consumer, sparked concerns about demand and sent crude below the $83 mark to settle at $82.75 at the close of trading on Friday. The Labor Department released unemployment data showing employers unexpectedly cut 85,000 jobs in December, although the unemployment rate remained unchanged at 10%, cooling optimism on the labor market’s recovery. Looking at the bigger picture, in the weeks ahead the markets will be focused on the dollar, the weather and geopolitical factors and how their impact on crude oil prices.
In its first report of 2010, the Energy Information Administration (EIA) data released this week showed crude stocks rose 1.3 million barrels to 327.3 million barrels, against a forecast for a 500,000 barrel drop and against the American Petroleum Institute’s (API) report of a 2.3 million barrel decline. Gasoline stocks rose 3.7 million barrels, much larger than a 500,000 barrel build forecast, but smaller than the 5.6 million barrel increases reported by the API. On the demand side, the EIA data showed U.S. demand numbers that represent the weakest start for a new year since 1998. Total petroleum demand for last week was calculated at 18.755 million barrels per day (bpd), nearly 1 million bpd below numbers seen at the beginning of 2009 and compared to a 21.3 million bpd demand start in 2008. Gasoline demand dipped to 8.74 million bpd, down 330,000 bpd for the week.
The Weekend
“The new year is ushering in increasing prices at the pump, even though frigid temperatures have fewer people driving,” said David Weinstein, Manager of Public and Government Affairs for AAA Mid-Atlantic. “This time last year we were paying almost $1 less per gallon, because of much lower crude oil prices. Last year, crude was about $40 a barrel and now, it’s more than $80 a barrel. In all likelihood, gas prices will edge a little higher.”
The Week Ahead
Markets have been watching and will continue to watch continuing talks between Belarus and Russia over supply of Russian oil for 2010. Russia briefly cut oil supplies to Belarussian refineries in a dispute over pricing that raised the prospect of supply disruptions for European Union customers, another factor in the increase in crude oil prices this week. In a statement Friday, the Belarussian government said a delegation from Belarus was flying to Moscow on Saturday for more oil talks with Russia.