Oil prices are never static. But compared with last year's volatility, they are quite stable. Crude supply and demand have allowed for some inertia for price, hovering close to $40 per barrel for weeks (and maybe for weeks more). Oil price stability lets us see more obviously the correspondence between the trends in gasoline price and gasoline demand.
Assuming continued oil price stability or only modest rises, a likely retail price scenario is a gentle ride up with benign spring temperatures.
It's no accident that demand destruction has lessened with the price crash, and is now nil. In fact, demand recently made a comeback to zero shrinkage and preliminary data have it rising slightly compared with last year at this time. The average retail price remains $2.17 per gallon below its July 11 all-time high, and $1.16 below its year ago level.
The current rice still allows plenty of room for demand to move into healthy growth, if economic conditions permit. The still very low price and, apparently, some modest demand growth, are favorable to consumers and all sectors of the gasoline industry. Motorists are able to edge toward normal behavior during a tough economy, while margins for both retailers and refiners are good for now-some consolation for an extended period of lackluster volume.
As always, tax hikes or other government insertion affecting gasoline cost could easily stop demand growth in its tracks, curtail consumer mobility, and hurt industry health. With demand on the precipice of victory, now is a perfect time for industry and consumer solidarity against negative government action. The first job of such a coalition will be to demolish the spreading supposition that petroleum demand growth is bad for the economy.
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