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Economy in Brief

Energy Prices Are Volatile With Weak Demand & Short Supply Prospects
by Tom Moeller June 30, 2009

For all of last week, the energy markets continued to discount weakness in the economic environment. The likelihood of an easing in demand lowered the weekly average retail price for a gallon of regular gasoline slipped to $2.64 per gallon, down a nickel from the prior week. Yesterday, however, that decline stalled with heightened concerns regarding Mideast crude oil supplies. The Monday spot market price for a gallon of unleaded gasoline jumped roughly ten cents from last week's average to $1.90 per gallon. That jump did not, however, recover the price declines during prior weeks from the daily high of $2.04. The figures are reported by the U.S. Department of Energy and can be found in Haver's WEEKLY & DAILY databases.

The energy market's volatility was notably evident in crude oil prices. The price for a barrel of West Texas Intermediate crude oil jumped to $71.49 yesterday which was the highest level since the first week of the month. Prices averaged $68.76 per barrel last week. Against this backdrop crude oil production rose 3.6% y/y during the latest four weeks. In addition, supplies of crude oil continue plentiful as evidenced by a 13.3% y/y rise in inventories of crude oil & petroleum products. The figures on crude oil production and inventories are available in Haver's OILWKLY database.

The gasoline demand figures continued to improve modestly but the comparisons still are negative. Year-to-year gasoline demand last week fell by 1.3%. That remained improved from the roughly 5.0% y/y decline of last fall. 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 6.6% y/y in the latest week led by a 15.1% drop in distillate demand. These numbers also are available in Haver's OILWKLY database.

Finally, natural gas prices remained weak last week and fell to $3.86 per mmbtu (-70.0% y/y). Yesterday, natural gas prices held steady at $3.88 per mmbtu. Current prices are down by two-thirds from the high reached in early-July of $13.19/mmbtu.

Developing a Liquid Market for Inflation-Indexed Government Securities: Lessons from Earlier Experiences from the Federal Reserve Bank of St. Louis can be found here.

Weekly Prices 06/29/09 06/22/09 Y/Y 2008 2007 2006
Retail Regular Gasoline ($ per Gallon, Regular) 2.64 2.69 -35.5% 3.25 2.80 2.57
Light Sweet Crude Oil, WTI  ($ per bbl.) 68.76 70.61 -49.9% 100.16 72.25 66.12
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