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Economy in Brief

Gasoline Prices Fell In A Competitive Market
by Tom Moeller November 22, 2005

Last week, the US average retail gasoline price continued lower to $2.20 per gallon from $2.30 during the prior week and from $2.73 one month earlier. As of yesterday, the spot market price for gasoline was $1.44 per gallon and has roughly held that level for seven days.

Retail gasoline prices peaked in early September at $3.07 per gallon and have since fallen 72 cents or 28%. During that period spot gasoline prices are down $1.18 or 45%. The implied rise in gasoline retailers' margins has restored profitability. However, that rise in the retail price of gasoline versus the spot price followed several years of margin decline.

During the past month margins have fallen roughly 20%, in part reflecting a decline in gasoline demand of up to 3.5% versus the year ago level. In turn, lower prices seem to have revived demand which spiked last week and raised the four week average level of gasoline demand to roughly even with a year earlier after declining sharply through September & October.

Crude oil prices have continued lower as well. WTI crude yesterday at $57.21 per barrel was down versus an average of $62.50 during October and was 18% lower than the late August high of $69.82.

In November, natural gas prices reversed some of the strength of the prior three months. During the last three weeks gas prices averaged $10.08/mmbtu versus the high of $13.53 averaged during October. Nevertheless, prices still are up 71% versus all of last year.

Energy Prices 11/21/05 12/31/04 Y/Y 2004 2003 2002
US Retail Gasoline, Regular ($/Gal.) $2.20 $1.79 13.0% $1.85 $1.56 $1.35
Domestic Spot Market Price: West Texas Intermediate ($/Barrel) $57.21 $41.78 18.0% $41.78 $32.78 $31.23
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