Posts Tagged ‘Upward Pressure On Crude Oil Drives Pain at Pump’

Motorists Can’t Catch Break as Prices Continue Increase

(WASHINGTON, March 19, 2012) Crude oil prices moved higher today, as West Texas Intermediate (WTI) prices settled up $1.03 per barrel at $108.09 at the close of formal trading on the NYMEX. 

While oil prices for much of 2012 have been driven by global news — geopolitical tension with Iran, sovereign debt concerns in the Euro zone, and signs of economic recovery both domestically and abroad — today’s increase came with little news of this variety and was seen as the product primarily of weakness in the U.S. dollar.

WTI oil prices ultimately ended Friday less than a dollar above last Monday’s close, but this slight increase was only following a turbulent week of trading.  Prices have continued to see upward pressure from data showing a recovering U.S. economy and persisting concerns of a possible global supply disruption surrounding tensions with Iran; however several bearish factors sent prices lower at times last week. 

Strength in the U.S. dollar and a Department of Energy (DOE) report that was deemed unremarkable by traders saw WTI crude prices on Wednesday fall more than a dollar per barrel.  Crude oil, priced in dollars, becomes relatively more expensive as the dollar increases in value.  Oil futures subsequently become a less attractive investment, which exerts downward pressure on prices, as was the case Wednesday.

These losses were reversed early Thursday morning, as crude prices initially turned higher on positive news for the U.S. economy provided by jobless reports from the Department of Labor.  This early momentum was quickly reversed as reports surfaced that the U.S. and United Kingdom had agreed to a coordinated release of oil from the Strategic Petroleum Reserve (SPR) and many traders decided it was time to sell and quickly moved for the exits. 

The SPR — the largest emergency store of crude oil in the world with a capacity of 727 million barrels — was created in 1975 to protect from the impact of energy supply shortages or disruptions.  The Reserve is maintained by the DOE and can be tapped by Presidential order.  Oil was most recently released from the SPR in June of last year as part of a coordinated release with the International Energy Agency to offset the loss of Libyan crude oil from the global market.  Releasing crude oil from the Reserve into the market would be expected to exert downward pressure on crude prices.  These initial reports were, however, denied by U.S. officials who stated that no release from the SPR was imminent.  This saw crude prices tentatively recover most of their losses for the day. 

By the time the market opened on Friday, traders had shifted back to rally mode and returned their focus to the same bullish indicators that have kept upward pressure on crude oil prices in 2012.  WTI crude ended the week at $107.06 per barrel.

With crude oil prices remaining high, motorists across the country have continued to face rising gas prices at the pump.  The current national average price for a gallon of regular self-serve gasoline is $3.84.  This price is four cents more expensive than one week ago, 30 cents more expensive than one month ago, and 29 cents more expensive than one year ago. 

Across the country drivers continue to pay very different prices depending on where they live.  Motorists in seven states and the District of Columbia currently pay an average of more than $4.00 per gallon: Alaska – $4.23, California – $4.35, Connecticut – $4.01, D.C. – $4.07, Hawaii – $4.48, Illinois – $4.16, New York – $4.01, and Washington State – $4.01. While the lowest gas prices in the country are still found in the midcontinent region, led by motorists in Wyoming ($3.43) and Montana ($3.54), the gap between prices in these states and those found in some parts of the southeastern U.S. continues to narrow.

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