The recent run-up exceeds anything that oil analysts say they [image-nocss] have seen since the 1970s. But the streak should end Monday or Tuesday, Tom Kloza, publisher and chief oil analyst for OPIS, said Sunday.
The Energy Information Administration (EIA) reported that gasoline stockpiles grew last week by 3.4 million barrels, or 1.7%, much more than the 650,000 barrels that analysts had expected.
The bigger supply has pressured wholesale prices across the country, as demonstrated by a 10-cent drop to $1.93 a gallon Friday on the New York Mercantile Exchange. Prices on the West Coast fell 27 cents last week to $1.931 a gallon and were down 15 cents to $1.94 in the Chicago area that serves the upper Midwest. Those declines eventually will pass through to the consumer.
The question now is whether prices, which usually peak in the United States around the July 4th holiday, will backslide into the fall or if geopolitical problems in Iran and Nigeria will drive oiland gasoline priceseven higher after a short dip.
Typically, prices would decline about 10%25 or 30 cents a gallonthrough the rest of the summer, but Kloza said he worries that violence associated with the disputed election results in Iran and ongoing pipeline attacks in Nigeria could affect oil production in those countries.
Last year, tensions like those in Iran could have sent a jolt through energy markets as oil prices raced to $147 a barrel in July and gasoline prices peaked at $4.11 a gallon. But the longest recession since World War II crushed demand for oil, easing worries that global tensions would suddenly send prices higher. Gasoline prices bottomed at $1.61 a gallon on New Year's Eve at the height of the financial meltdown; however, even though overall demand for energy remains weak, money has poured into oil markets recently as the dollar has fallen against the euro. Investors have used crude as a hedge against inflation, betting that oil prices will likely increase as the economy improves and global supplies start to shrink.
Crude prices have doubled in the last three months, hitting a high for the year of $73.23 a barrel last week before retreating. The rise in crude has pushed gasoline prices higher, hitting the wallets of consumers, who are now paying about a $1 billion a day for gasoline compared with $600 million at the beginning of the year. That impacts the amount cash-strapped consumers can afford to spend on discretionary items, threatening the nation's economic recovery.
Meanwhile, after seven successive weeks of rising gasoline prices in the United States, Americans, on average, predict gasoline will go up to $3.39 a gallon this year, according to a new poll by Gallup Inc., Princeton, N.J. That forecast is 70 cents higher than the average $2.69 Americans say they currently pay for a gallon of regular gasoline, but is still significantly lower than the record-high $4.11 pump price the government reported last July.
The slight majority of Americans (53%) in the June 14-17 Gallup Poll believe gasoline prices will top out at no more than $3.49 per gallon in 2009; 42% believe they will go higher than that, including only 22% who predict they will hit $4 or more (click on the chart above to view a larger version).
At today's price level, 56% of Americans say the recent price hikes are causing them financial hardship--including 12% who say they are causing "severe hardship" that affects their ability to maintain their current standard of living.
Nearly three-quarters of those earning less than $30,000 per year, 71%, say gasoline prices have caused them hardship. The figure is only slightly lower among middle-income earners (60%), but drops to 39% among those making $75,000 or more. Experiencing severe hardship is even more pronounced by income, ranging from 24% among low-income earners to just 3% among the highest income group.
The percentage of Americans reporting any degree of hardship from gasoline prices this year is about average for the Gallup trend. The current 56% is higher than the 36% to 44% found in 2000, when prices were still well below $2; however, it is substantially lower than the 71% found in May 2008, when the average price was $3.60.
Rising gasoline prices are beginning to affect Americansa majority say the higher prices are causing them financial hardship. Still, Americans do not expect gasoline prices to climb as high as they did last year.
But even a more modest increase in gasoline prices is unwelcome news for consumers and the broader U.S. economy. U.S. consumers have pulled back significantly on their spending this year, said Gallup, even as gasoline prices were at low levels for much of the early part of 2009. Higher gasoline prices would leave Americans with even less disposable income to spend to help get the economy moving again.
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