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Economy in Brief

Petroleum Prices Down, And Going Lower?
by Tom Moeller October 21, 2005

As of last week the US average retail gasoline price fell to $2.73 per gallon, down 11.2% from the weekly high of $3.07 seen in early September. Moreover, yesterday's NY harbor spot price for regular unleaded gasoline was down twenty cents to $1.55 from the week previous, the lowest since July, and the seven day average price was off 21.6% from its high.

Father Guido Sarducci's axiom that in economics, all that matters is supply and demand is behind the recent price declines. US gasoline supplies have soared due to the surge in gasoline imports which have more than doubled versus last year. That has supplanted a shortfall in production which was limited by a sharp recovery last week to roughly -2% y/y. Demand, on the other hand, has responded to the higher prices and is down sharply, by roughly 8% versus the year ago level.

Lower prices for crude oil have allowed for the gasoline price decline as WTI crude fell yesterday to $61.04 per barrel. That was off 13% from the late August high of $69.82.

The decline in wholesale natural gas prices has been limited versus the petroleum price declines. At $13.09/mmbtu yesterday and $13.42 last week, gas prices were off 13% from the daily high $15.00 one month ago, but trend prices remained elevated ahead of the Winter heating season.

Are Inflation Expectations Rising from the Ashes? from the Federal Reserve Bank of St. Louis can be found here.

For the latest Short Term Energy Outlook from the US Department of Energy click here.

Energy Prices 10/17/05 12/31/04 Y/Y 2004 2003 2002
US Retail Gasoline, Regular ($/Gal.) $2.73 $1.79 33.9% $1.85 $1.56 $1.35
Natural Gas, Henry Hub, LA ($/mmbtu) $13.42 $6.35 139.6% $5.89 $5.47 $3.35
Domestic Spot Market Price: West Texas Intermediate ($/Barrel) $63.21 $41.78 18.6% $41.78 $32.78 $31.23
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