Gas Prices Creeping Up To $3 a Gallon

After holding steady for most of April, gas prices saw a dramatic upturn this week, much to the chagrin of motorists. In the past week gasoline prices have jumped 4 cents nationally to $2.92 on Friday, a high not seen since October 2008. Despite reports to the contrary, the recent up-tick in pump prices is not a result of the oil spill in the Gulf of Mexico, but rather the federally mandated switchover to more expensive summer gas blends which began May 1. Current prices are 78 cents higher than a year ago, but still $1.19 less than the record high set in July 2008.
Contrary to gas price increases this week, crude oil saw a dramatic downturn. Crude began the week at $86.15 a barrel (just below April’s high of $87 a barrel) and gradually fell throughout the week to below $76 a barrel Friday, a $11 or 12.6% fall in one week, its worst week since early 2009. This week’s drop in crude oil prices is a direct result of market reaction to the growing debt crisis in Greece, fear over global economic recovery and that the current crisis in Greece could spread to other European countries, and a stronger U.S. dollar. After a tumultuous week, crude oil closed the week at $75.11 Friday, the lowest since February 12, 2010.
The Energy Information Association’s (EIA) weekly report showed crude stocks rose 2.8 million barrels to 360.6 million barrels against a forecasted 1.1 million barrel gain, marking the sixth consecutive week crude inventories have been above 350 million barrels. Gasoline stocks were up 1.2 million barrels to 226.9 million barrels, surpassing the forecasted 2,000 barrel increase.
The Weekend
“Prices at the pump took a leap toward the $3.00 mark this week, passing it in 13 states, including the District of Columbia, leaving motorists to dig deeper into their pockets to fill their tanks,” said Tracy E. Noble, Manager of Public and Government Affairs for AAA Mid-Atlantic. “Despite reports to the contrary, this week’s up-tick in gas prices is not a result of the oil spill in the Gulf of Mexico, but rather the switchover to more expensive summer gas blends which began this week. Given this week’s spike in prices at the pump, analysts believe $3.00 a gallon gasoline will become a reality in many states by Memorial Day weekend.”
The Week Ahead
Oil spill workers will continue their race again time to contain a huge spreading oil slick in the Gulf of Mexico before it hits the U.S. shoreline and potentially impacts oil imports. As of this weekend, shipping routes and production remained unaffected in the Gulf, but that could certainly change at anytime. Analysts and regulators will continue to monitor the situation. Prospects for tougher offshore standards have analysts and oil companies crunching numbers to determine how they will affect offshore drilling economics and ultimately future world oil prices.

CURRENT AND PAST GAS PRICE AVERAGES

Regular Unleaded Gasoline (*indicates record high)