AAA: Gasoline Prices Continue to Rise

Gas prices jumped 6 cents this week and 14 cents in the past month to a 2010-high of $2.78 Friday, just as motorists prepare to “spring ahead” this weekend to the spring driving season. Prices at the pump typically increase with the start of the spring driving season, as is the case this year. However the continued increase in crude oil prices is also a factor. The national average price of regular grade gasoline remains 85 cents above last year’s prices and $1.33 below the record-high set in July 2008. The Oil Price Information Service (OPIS) forecasts gasoline prices will “top $3.00 a gallon between April and June as warm weather encourages more driving, before dropping to as low as $2.50 after the summer driving season.”
After trading above the $80-mark this week, crude oil rose to a two-month high of $83.16 a barrel early Friday only to close the week lower at $81.24. A weaker U.S. dollar, increased U.S. retail sales (up 0.3% in February) and increased sentiment that energy demand growth will continue in developing nations, all contributed to oil’s continued sustainability above the $80-mark. However, consumer confidence dropped and the Commerce Department data reported business inventories were flat in January, indicating economic recovery remains slow. Analysts have said that the longer oil stays above the $80-mark, the more comfortable investors become with that price floor and the more likely oil is to stay above that range. The Energy Information Administration (EIA) expects crude oil to average above $80 a barrel this spring and rise to an average of $82 by the end of 2010.
In its weekly report, the EIA showed crude stocks rose 1.4 million barrels to 343 million barrels. Gasoline stocks fell by 2.9 million barrels to 229 million barrels. The EIA also reported demand moved slightly higher to 8.992 million barrels per day (bpd).
Also this week, OPEC slightly tweaked its 2010 demand forecast to 900,000 bpd, which is 100,000 bpd more than its previous forecast. Its demand projection is based on a global economic growth of 3.4% in 2010, with the majority of that growth coming from China and other non-OEDC (Organization for Economic Co-operation and Development) countries.
The Weekend
“Heading into the weekend, the average retail price of gasoline rose to $2.78 a gallon, hitting the highest level in two years (since 10/24/08). It’s another telltale sign of spring, when pump prices tend to increase,” said Tracy Noble, Public Affairs Specialist for AAA Mid-Atlantic. “Other signs are equally ominous. The future prices of gasoline have increased 25 cents a gallon since February 25. Gasoline demand is also increasing, and so is the price of crude. As seasonal demand for gasoline increases with the warmer weather, so do gas prices. Gas prices will top $3.00 a gallon between the spring and summer months, OPIS analysts are forecasting.”
The Week Ahead
Looking ahead to the Atlantic hurricane season that begins June 1, Macquarie Energy is predicting the highest number of tropical storms and hurricanes in the Atlantic ocean compared with other weather consultants. Due to the number of winter storms to hit the U.S. over the past few months, predictions for increased tropical activity during the 2010 hurricane season is a concern. Any significant storm to hit the U.S. gulf coast would potentially interrupt refining and directly impact prices at the pump.
OPEC members meet in Vienna on Wednesday, March 17 and are not expected to change production targets.

CURRENT AND PAST GAS PRICE AVERAGES

Regular Unleaded Gasoline (*indicates record high)