Record Price, Record Demand
Refinery problems, global politics also playing their part
CAMARILLO, Calif. -- Gasoline prices jumped nearly 20 cents in the past three weeks, to $2.5011 for self-serve regular on August 12, up 19.89 cents since July 22. The price broke the all-time record for the third time this year, according to the most recent Lundberg Survey ( www.lundbergsurvey.com) of approximately 7,000 U.S. gas stations.
The overwhelming reason was crude oil, which itself broke a record at nearly $67 per barrel on August 12. The price difference from three weeks ago was virtually identical [image-nocss] to the price difference for retail gasoline.
It's not just a record price. It's record demand. Even at these lofty prices, gasoline demand is still growing. And it's world demand for crude, the
essential reason for high oil prices.
But the price surge is running its course. Chances are very good for crude to be peaking, indeed the forward NYMEX futures price peak puts the price about a dollar higher in February, instead of several dollars higher as it recently did. If one assumes comparatively stable oil prices, with for example no Ivan-strength hurricane damage to oil facilities, then gasoline prices are likely peaking as well. The gasoline demand drop off that always takes place after August will remove some price pressure on product.
Current record prices, when adjusted for inflation, are in fact 50 cents per gallon lower than the true peak price back in 1981--when crude oil cost about $23 per barrel more than they do today, said Lundberg.
Refinery woes and Iran are combining to push up oil prices, added a Dow Jones report. The price of oil has risen 54% so far this year, it said.
"Once again, refinery woes were at the center of the advance," said Peter Beutel, president of trading-advisory firm Cameron Hanover. "It doesn't take much to push the market higher."
A power outage shut Premcor Inc.'s 190,000-barrel-a-day refinery in Memphis, Tenn., said a county health official. The incident is the latest in a string of outages that have hit about a dozen U.S. refineries in the past three weeks.
The market also may have been pricing in the prospect of a showdown between Iran and the United States, Dow Jones said. Iran, one of the Middle East's largest oil producers, recently resumed uranium conversion, a step before the enrichment of uranium, which can be used for generating power or making atomic bombs. Iran said its nuclear program is for power generation, but the United States said it is a cover for a secret weapons program.
The International Atomic Energy Agency expressed "serious concern" Thursday over Iran's decision. In a resolution, the agency urged Iran to suspend conversion to reassure the United States and others that it is not concealing a weapons program. But the watchdog stopped well short of referring Iran to the U.N. Security Council, indicating it wanted to leave space for further negotiations to defuse the standoff.
Still, worry that Iran will be referred to the Security Council for potential sanctions and, worse, the prospect of a military confrontation, is likely to keep oil prices sharply higher.