Monday, June 22, 2009

Gasoline Prices Near Peak

U.S. gasoline prices have gone up 54 days in a row, which even after last year has to be some kind of record. Now there are reasons to hope that prices are near their peak.

  • A recent flurry of optimism about the U.S. economy is starting to fade as new statistics come out showing a continuing decline. Economic optimism had lifted world oil prices, and those now seem to be stabilizing.
  • U.S. gasoline inventories are larger than you would expect at this time of year.
  • U.S. gasoline demand tends to be highest around July 4, Independence Day, and then to decline from July through October.
  • Total U.S. employment continues to fall, and this is the biggest factor affecting U.S. gasoline demand. Fewer jobs means fewer people driving to work, so gasoline demand will continue to be soft.

Prices will probably begin to decline in July, but they may not decline by much.

  • Gasoline prices are not so high, one third less than last year. When prices are lower, it is harder for them to fall.
  • Any hurricane in the Gulf of Mexico could disrupt oil or gasoline production, sending prices higher for several weeks. The most active part of the North Atlantic hurricane season is between August and October.
  • Political worries about Nigeria and Iran could provide upward pressure on world oil prices, even if supplies from those countries are not disrupted.
  • If the U.S. dollar weakens, that would drive up prices of all imports, including oil.