It's not world or U.S. petroleum demand, summer driving or refinery glitches that are giving motorists a mini-shock when so many of them are jobless and underemployed. [image-nocss] No, oil and products demand is shrinking here and worldwide due to bad economic conditions, and refiners have a sadly large spare capacity to produce more gasoline if demand warranted.
Ironically, it is, to some significant degree, the federal efforts to improve the economy that have hiked pump prices, if we connect these dots: oil hiked gasoline, and oil is hiked by the weaker dollar and awesome flood of government spending, suggesting to investors that worsening inflation is on the way so holding oil is safer than holding dollars. The motoring public is paying higher gasoline prices than they would have otherwise, if not for this new fangled "speculation" affecting the oil market.
Currently, the numerous unknowns for the oil and gasoline markets include future U.S. monetary policy. If the NYMEX oil futures market's view of the rest of 2009 proves true, then the retail gasoline price will probably rise a few more pennies--a few for crude, and a few for retailers. The grade-pooled average U.S. retail gasoline margin gained slightly in the past month, but is still barely over six cents, or about half its recent historical norm.
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