Even as retail gasoline prices climbed for the 50th straight day Wednesday, analysts believe the rise in prices is losing momentum. Primary evidence is found in benchmark prices for crude oil, which fell for the fourth straight day.
Retail gasoline prices hit a national average of $2.722 this week, up 4.9 cents from the previous week, and diesel prices jumped 7.4 cents to average $2.572. Historically, prices tend to rise during the summer as Americans drive more. But analysts say a surge in crude oil prices the past few months and less production from refiners that make fuel have helped prices move higher.
Crude oil, however, fell below $70 a barrel for the first time in a week after a key government report said U.S. gasoline supplies grew more than expected last week.
The Energy Information Administration said gasoline reserves grew last week by 3.4 million barrels, or 1.7 percent, to 205 million barrels.
Gasoline and diesel prices are at their highest levels since last October, and they’re well above most predictions made earlier this year. But the new predictions from industry analysts point to a softening of fuel prices in the coming weeks. The EIA said this week that crude inventories fell by 3.9 million barrels from the previous week, but analysts note that U.S. inventories are still bloated with the largest supply they’ve had in nearly 16 years.
Other indications that fuels prices may have peaked are found in the fact that oil prices have come off eight-month highs near $73 per barrel at a time when the U.S. economy — while past the worst of the recession — is still relatively weak. Demand for gasoline has been flat and down 8 percent for petroleum products overall, while stockpiles are at a peak.
Possibly most encouraging for consumers of petroleum products, however, is the way the crude oil market has reacted to this week’s unrest in Iran over that country’s election results. A similar event in the Middle East last year probably would have caused oil prices to soar, but instead they fell 15 cents per barrel on Tuesday.
For what it’s worth, the EIA has a new prediction out this week for peak summer gasoline prices. The EIA says the national average will be about $2.70 per gallon in July, and for all of 2009 the agency expects an average price of $2.33 per gallon. Next year, as the economy is expected to improve, the EIA predicts gasoline prices will average about $2.56. — Greg Henderson, Drovers editor.