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Economy in Brief

Gasoline Prices Reach Their Highest Level Since October
by Tom Moeller May 27, 2009

The news that the U.S. economy, notably the consumer, is recovering from the Winter doldrums has given further life to energy prices. Suspecting that a more confident consumer will drive further, regular gasoline prices last week continued their recent upturn and rose to an average $2.44 per gallon of regular. The gains have taken prices up by 82 cents, or by one-half, from the December low to the highest level since early-November. Yesterday, cash market prices traded higher still at $1.80 per gallon versus $1.78 averaged last week and these were the highest prices since last October. The figures are reported by the U.S. Department of Energy and can be found in Haver's WEEKLY & DAILY databases.

A strengthening of crude oil prices has continued together with the gains in gasoline costs. Crude prices averaged $60.48 last week for a barrel of West Texas Intermediate, up from the December low of $32.37 per barrel. Yesterday, crude oil prices rose even further to $62.45. Prices reached a high of $145.66 last July. The latest increases occurred despite a 2.7% year-to-year rise in crude oil production during the latest four weeks. The figures on crude oil production are available in Haver's OILWKLY database.

For the moment, higher gasoline prices & economic weakness continue to lower gasoline demand, last week by 2.7% y/y. The change in demand is measured using the latest four weeks versus the same four weeks in 2008. Demand for all petroleum products was down 7.6% y/y led by a 38.8% drop in demand for residual fuel oil and a 14.9% drop in distillate demand. In addition, the price gains have occurred despite an 11.0% rise in inventories of crude oil & petroleum products. These numbers also are available in Haver's OILWKLY database.

Finally, the gains in the price of natural gas paused last week and it fell back to $3.77 per mmbtu (-66.6% y/y). The latest price was nearly the lowest since 2002 and is down by two-thirds from the high reached in early-July of $13.19/mmbtu.

Prospects for Oil Market Stability from the International Monetary Fund can be found here.

Weekly Prices 05/25/09 05/18/09 Y/Y 2008 2007 2006
Retail Regular Gasoline ($ per Gallon, Regular) 2.44 2.31 -38.2% 3.25 2.80 2.57
Light Sweet Crude Oil, WTI  ($ per bbl.) 60.48 58.07 -53.5% 100.16 72.25 66.12
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