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Economy in Brief

Gasoline Prices Move Higher As Crude Prices Rise And Demand Stabilizes
by Tom Moeller August 4, 2009

The economy must be improving if gasoline prices are rising. Or is it seasonal strength? The pump price for regular gasoline increased last week to an average $2.56 per gallon, though that still was down a nickel from last month's high. The increase added to the nearly one dollar (59%) rise from the December low. Yesterday, however, the pricing strength was even more evident with the twenty cent jump to $2.03 per gallon in the cash market price. Gasoline prices were up off the early-July low of $1.60. The figures are reported by the U.S. Department of Energy and can be found in Haver's WEEKLY & DAILY databases.

Crude oil prices also have strengthened. Light sweet crude oil prices (WTI) increased to $67.23 per barrel and they've roughly doubled this year. Yesterday the spot market price for light sweet crude oil rose further to $71.58 per barrel. Prices had reached a daily high of $72.68 earlier in July.

The pickup in energy prices is against the backdrop of a firming demand picture. It probably is seasonal, but during the last four weeks the demand for gasoline is up sharply. Year-to year, demand still is down by 1.8%, but that compares to a nearly 5% rate of decline last fall. Demand for distillate also is off sharply though residual fuel oil demand has moved higher. Finally, oil remains plentiful as evidenced by a 13.0% y/y rise in inventories of crude oil & petroleum products. Inventories of gasoline are flat y/y but crude oil inventories less the SPR are up by 17.8%. The figures on crude oil production and inventories are available in Haver's OILWKLY database.

Natural gas prices continued their move sideways last week. At an average of $3.44 per mmbtu (-62.8% y/y), the price was down by three-quarters from the high reached in early-July of last year of $13.19/mmbtu.

Weekly Prices 08/03/09 07/27/09 Y/Y 2008 2007 2006
Retail Regular Gasoline ($ per Gallon, Regular) 2.56 2.50 -34.1% 3.25 2.80 2.57
Light Sweet Crude Oil, WTI  ($ per bbl.) 67.23 64.72 -45.0% 100.16 72.25 66.12
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