CAMARILLO, Calif. -- On April 22, regular grade gasoline averaged $3.8800 at retail, up 11.53 cents over the past two weeks, according to the most recentLundberg Survey of approximately 2,500 U.S. gas stations. During the prior three-week period the hike was more than 19 cents. World oil prices slipped some during the period. If they stay at current levels or slip further, then further retail gasoline price hikes will probably be small--or maybe cease altogether. It is even possible that the retail price of gasoline [image-nocss] is already peaking.
Another factor in where prices go next: U.S. gasoline demand, although a small contributor compared with the power of crude, seems to be rejecting current prices. Demand growth was already weakened by underemployment, and the 70 cent retail price hike since mid-February appears to have done damage. U.S. refining capacity use is wretchedly low, and refiners would be delighted to crank it up if demand allows.
Refiners and retailers are again between a rock and a hard place: As gasoline prices are up by $1.19 since late September 2010, the drumbeat of bureaucrats and politicians to "root out" price gougers is getting louder. The Obama Administration's new task force charged with monitoring both physical "wet" markets and futures "paper" markets will increase the harassment of the oil industry with fines and threats of jail time that always come when prices zoom up--but never bring apologies or rewards when prices crash back down.
(Click here for previous CSP Daily News coverage of the Financial Fraud Enforcement Task Force Working Group.)
The Federal Reserve is one of the agencies participating in the task force. The Fed's quantitative easing, which has effectively added to the price of crude and therefore gasoline, occurred right around the beginning of this seven-month price climb. The Fed has indirectly added substantially to what world oil demand had been doing to the price of crude. Libya's civil war was the third powerful oil price booster during the past several weeks.
If the new task force recognizes world oil demand and the Libyan war as causes of higher gasoline prices, perhaps it will also recognize one of its members, the Federal Reserve, as another.
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