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Economy in Brief

Gasoline Prices Remain Roughly Stable As Crude Oil Prices Tick Higher
by Tom Moeller September 1, 2009

Earlier strength in gasoline prices took a breather during July and August. Nevertheless, prices remained up sharply since the year began. The pump price for regular gasoline dipped slightly last week to an average $2.61 per gallon, roughly where it's been since early June. Compared to the December low, however, prices remained up by one dollar (62%). Yesterday, that slight decline in pump prices was accompanied by a dip in the wholesale gasoline price to $1.84 per gallon. Prices had reached a high in early-August of $2.03. The figures are reported by the U.S. Department of Energy and can be found in Haver's WEEKLY & DAILY databases.

In contrast to the stability of gasoline prices, crude oil prices have strengthened. Light sweet crude oil prices (WTI) increased to $72.41 per barrel last week versus a June high of $70.61. Prices have more-than-doubled since the December low of $32.37. Most recently, the price strength eased. Yesterday the spot market price for light sweet crude oil fell to $69.96 per barrel. Prices had reached a daily high of $73.82 just last week.

Earlier strength in gasoline prices stood against the backdrop of a firming demand picture, which now has eased. Since early-June the demand for gasoline has dropped moderately and year-to year demand slipped by 3.5%. Demand for distillate also is off sharply (-19.8% y/y) and residual fuel oil demand has given back its earlier strength (-14.8% y/y). Finally, oil remains plentiful as evidenced by an 11.3% y/y rise in inventories of crude oil & petroleum products. Inventories of gasoline recently have dropped somewhat but they have strengthened by 6.5% versus last year, the strongest gain since early last year. The figures on crude oil production and inventories are available in Haver's OILWKLY database.

Natural gas prices make up the weakest part of the energy sector's pricing environment. Falling last week to an average of $2.72 per mmbtu (-66.5% y/y), prices were down by over three-quarters from the high reached in early-July of last year of $13.19/mmbtu.

Has Greater Globalization Made Forecasting Inflation More Difficult? from the Federal Reserve Bank of Dallas can be found here.

Weekly Prices 08/31/09 08/24/09 Y/Y 2008 2007 2006
Retail Regular Gasoline ($ per Gallon, Regular) 2.61 2.63 -29.0% 3.25 2.80 2.57
Light Sweet Crude Oil, WTI  ($ per bbl.) 72.41 70.82 -37.9% 100.16 72.25 66.12
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