WASHINGTON – WASHINGTON – AAA’s recent report on fuel prices showed crude oil moving up slightly over last week. Since October, crude oil prices have gone up substantially while retail gasoline prices have decreased.
Crude oil prices have gone from $75.67 per barrel on October 4 to $100.99 in the second full week in December. During this same period, gasoline prices dropped 15 cents per gallon. This price movement is due to historically weak demand for gasoline counteracting the price pressure that one would normally expect from higher crude oil prices, AAA stated.
What’s causing the rise in oil prices, according to AAA? With the European Union potentially working through its current debt crisis, and some positive signs for the U.S. economy, equities markets are on the rise. The relatively weak dollar and concerns over Iran are putting upward pressure on oil prices, too.
The effect of this upward pressure was an increase of 3 cents in the price of West Texas Intermediate (WTI) crude oil, at $100.99 at the close of the NYMEX on Monday. The previous week’s increase in crude oil prices occurred due to positive international and domestic news as well as increasing concern over Iran, according to AAA.
The weekly Department of Energy report last Wednesday showed domestic petroleum demand of just 17.946 million barrels per day, which is the lowest weekly number since June 2009. Although gasoline demand rose 177,000 barrels per day when compared with the previous week, the EIA attributed this increase in demand to Thanksgiving holiday travel. Demand was still 3.8 percent lower than the same period in 2010.
Global central banks last Wednesday announced a move to add liquidity to the financial system in order to address concern over the debt crisis in Europe. This news helped stock indices surge, with the Dow Jones Industrial Average posting its largest one-day gain in more than a year Oil prices move higher as well.
Despite the overall market surge, a negative U.S. Energy Information Administration (EIA) report noted a drawdown in crude oil stocks and weak domestic gasoline demand, both of which dampened crude oil prices, AAA reported.
On Thursday of last week, the EU and U.S. announced plans to tighten sanctions against Iran over its nuclear program. Although Iran said sanctions could send oil prices skyrocketing, traders didn’t take the threat seriously, so the impact on oil prices was minimal, according to AAA.
That said, the EU imported 450,000 barrels per day of crude oil from Iran last year, so if Iran makes good on any threats to reduce oil exports (or the EU decides to stop importing Iranian oil), oil prices could increase significantly.
On Friday of last week, data showing a much better than expected jobs report boosted optimism about the U.S. economy recovering. Signs of a recovery tend to increase expectations that demand for oil will rise.
A recent report from Wright Express shows gas prices heading downward in the near future, but the company expects prices to start heading upward again as we move into spring of next year.