The myth that holidays and vacations drive [image-nocss] gasoline use, when it is the job commute that does this, persistsand adds insult to injury to those motorists who now can barely motor anywhere. (See related story in this issue of CSP Daily News.)
That deep discount is helping gasoline demand, but only from falling worse than it is. The June 20, 2008,price of $4.10 (first time ever above four dollars), followed by the all-time high of $4.11 on July 11, produced a little demand shrinkage; but soon, it was the economic crisis and unemployment, not price, that ravaged and still ravages gasoline demand.
Nationally, retail price has probably peaked. There are several hints that retail prices will drift down from here: Midwest retail prices, that usually lead the way for other regions during a price reversal, slipped nine cents in the past two weeks on average. And nationally, the no-change in the regular grade retail price, which usually leads the way for the other two grades during a price reversal, contrasted with rises of more than half a cent for mid and premium. Also, on June 26 retail margin is temporarily swollen (nearly 18 cents on regular), and is destined to shrink soon via passthrough of recent wholesale price cuts.
But nothing spells the end of a retail price climb like steady crude.
Crude oil (futures near-month, light grade benchmark) has been stuck lately in a tight range, about $69 to $71 per barrel. This was caused by weak demand bearing down on price and the weak dollar pushing up on price, meeting at about $70. Among the near term scenarios for the oil price, a demand surge is impossible due to world economic conditions and short supply can be discounted as unlikely (as $70 crude is economical for most production).
As always, a geopolitical trauma could short supply and hike oil price.
What remains for summer 2009 is a high chance for stable oil prices due to continued oversupply of both dollars and petroleum. Unfortunately, neither of them have delivered recovery for either jobs or petroleum demand.
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