AAA: Motorist Thankful For Gas Price Stabilty

Motorists took to the roads this week, for what is typically the busiest travel weekend of the year, thankful for stability at the gas pump for the fourth consecutive week. The average U.S. retail price for regular gasoline was $2.63 a gallon on Friday, down just 1 cent from last week, 78 cents above year-ago prices and $1.48 below the record set last July.
After trading near $78 midweek amidst news of increased consumer spending and October new home sales rising to their highest level in a year, crude oil dropped to six-week lows below $75 a barrel on Friday as fears that Dubai could default on tens of billions of dollars as part of a restructuring Dubai World, the conglomerate that spearheaded the emirate’s growth. Investors are concerns such debt default fears could hit other parts of the global economy and derail a fledging recovery from 2008’s global financial crisis. Following the Thanksgiving Day holiday and an abbreviated session on Friday, crude oil closed the week at $76.05. Oil prices have fallen about 10%since reaching a year-high of $82 early last month.
In its weekly report, the Energy Information Administration (EIA) data showed crude stocks rose 1.0 million barrels to 337.8, less than the forecasted 1.2 million barrel increase and far less than the3.3 million barrel rise reported by the American Petroleum Institute (API). Gasoline supplies also rose 1.0 million barrels to 210.1 million barrels, against a forecast for a 300,000 barrel rise and less than the API’s reported 1.7 million barrel increase. The EIA also reported gasoline demand over the last four weeks was up 0.5% from the same period a year ago.
In addition, the Federal Highway Administration announced late last week that cumulative mileage driven by U.S. motorists in 2009 through September showed a small but noticeable increase of 0.3% when compared to the first 9 months of 2008. For the first time in three years, U.S. motorists have driven more miles during the year than they did during the same period in the previous year. Also, vehicle miles traveled in September of this year were up 2.5% (5.8 billion miles) compared to September 2008.
“Gas price stability continues and this is welcomed news for motorists traveling home from the Thanksgiving holiday weekend,” said David Weinstein, Manager of Public and Government Affairs for AAA Mid-Atlantic. “Automobile travel is projected up 2.1% compared to last year, showing that motorists are returning to some of their traditional travel habits and that consumer confidence may slowly begin to return.”
The Week Ahead
The financial markets will continue to watch the financial situation in Dubai following the emirate’s request for a debt standstill on billions of dollars as part of a restructuring. Many investors are worried the Dubai situation could potentially cause a domino effect if Dubai cannot pay their debt, derailing recovery from the global financial crisis. In part, this is a similar reaction to last year’s Lehman Brothers debacle which shook confidence in the financial markets. When the U.S. dollar is weak, oil prices tend to rise. Crude oil is priced in U.S. dollars and becomes cheaper to investors using other currencies when the dollar loses strength. When a weak dollar combines with positive economic data, oil prices may pass $80 per barrel. When the dollar is stronger and economic data is more negative, oil prices typically retreat towards $75 per barrel.