Gasoline Prices Increase Despite of Low Demand and Crude Oil Costs

Gas costs keep on increasing to high levels in spite of reductions in crude oil price.

Reports reflect an extremely weak demand for gasoline but refineries reduce its production in response to this that is why there is a little increase in gasoline prices.

Prices of gas recently reached its highest rate in over four months at $3.50 per gallon. This cost is an increase by 3 cents from the previous weeks, 13 cents from the past months and 38 cents compared to the same period in the prior year. Still, gas prices stay 61 cents lower compared to its all time high record of $4.11 back in July 2008.

As the weakening of demand in the United States and abroad hurts crude prices, additional reductions has been controlled by rumors on the possibility of a supply disruption with the continuous build up of tension in Iran. Simultaneously, the effect of good news sorrounding the economic recovery of the United States has been greatly compensated by bearish reports regarding the euro zone.

Oil futures disregarded data of poor demand and moved higher to almost $100 when political leaders of Greece made an announcement that they had come up with a new debt deal and the Labor department reported an additional reduction in the number of applicants applying for unemployment benefits. But, doubts about the financial reforms of Greece sparked concerns about Europe’s economic downturn and pushed crude oil prices down in the previous days to stay at $98.67. For almost three weeks, crude oil prices have not reached more than $100.

The Energy Information Administration’s weekly report showed that the crude oil stocks of the country increased by 304,000 to reach 339.2 million barrels. Gasoline inventories increased by 1.6 million barrels to reach a slightly higher gain of 231.8 million barrels compared to the projected amount. The average demand for petroleum decreased to 18.116 million barrel a day, the lowest level for 28 days in almost 177 months. Based on monthly average, demand for gasoline fell by 6.8% compared to the past year.

The recent increase in gasoline prices is quite unusual since January and February oftentimes mark low prices. Analysts think that this trend will go on during the summer and spring months of the year.

By Chris Termeer

Chris Termeer

Chris Termeer is an oil and gas consultant, industry commentator and analyst. His book, Fundamentals of Investing in Oil and Gas provides a comprehensive overview of all aspects of the oil and gas industry, including exploration, drilling, production, storage, transportation and refining, to name but a few.

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