Fuel prices are up in an unusually early spike, but federal analysts predict things will level off at the pump for the rest of 2013.
Gas prices have taken some big jumps in recent weeks, rising an average of about 45 cents since this time last month. There are pumps now pushing past the $5 mark in parts of Southern California, and some speculators are betting the traditional, seasonal spikes could come earlier and faster than normal, with fuel reaching record levels in 2013.
Don’t count the folks at the U.S. Energy Department among them. If anything, the DoE actually anticipates gasoline prices for 2013 will hold flat or even slip a bit, despite recent spikes blamed on speculation and refinery closings.
There are already some signs traders fear they have over-stretched. And the slow and uncertain pace of the economic recovery – along with continuing economic issues in Europe and China – may ease demand that would otherwise drive up petro-speculation.
For now, though, such promises offer little comfort. Regional markets in the United States are experiencing an unusually strong and early price spike. Motor group AAA reports drivers in New York paid, on average, $3.94 for a gallon of regular unleaded gasoline, up more than 20 cents from January and prices around Detroit are also touching $4 per gallon.
The national average for a gallon of regular has risen to $3.75, though that can range from a low of $3.19 in Montana and Wyoming, to $4.17 for California as a whole. Daily price records were reported for California market earlier this month when prices increased 14 cents in one week to more than $4 per gallon.
Tom Kloza, an oil analyst for the Oil Price Information Service, told the Los Angeles Times “there has never been this much money bet on higher gasoline prices this early in the year.”
Nevertheless, Energy Department’s Energy Information Administration reports that a decline in crude oil prices may push gasoline prices lower, on average, for the year when compared to past retail prices.
The EIA said it expects gasoline prices for 2013 to average $3.55 per gallon in 2013 and $3.39 per gallon in 2014. While more than 10 cents less than last year, those forecasts are 11 cents and 4 cents higher, respectively, than the agency predicted in January.
Trading in gasoline futures, however, has come under new scrutiny with at least two prominent Democrats, Edward Markey of Massachusetts and Rose DeLauro of Connecticut demanding new restrictions after traders were blamed for recent spikes in the price of gasoline.
But the traders themselves seem nervous they may have overplayed their hands. For example, gasoline prices retreated in late January on speculation that prices rose too fast in the longest rally since July 2009 and as oil fell on concern that a rise in U.S. jobless claims signals weaker economic growth and relatively stagnant fuel demand.
Also a potential factor is the rising fuel efficiency of new vehicles, which is at an all-time high according to surveys done by the University of Michigan. That’s one reason why gasoline demand is 0.6% below the five-year average, government data show. New discoveries and increased drilling translates into increased supplies of crude oil in the U.S. – which is also expected to help moderate prices.
The OPEC cartel, which controls roughly 40% of the global oil supply, reduced production in November and December to bolster prices. However, OPEC is now projecting level production.
An oil future is a contract between a buyer and seller, where the buyer agrees to purchase a certain amount of a commodity — in this case oil — at a fixed price. Futures offer a way for a purchaser to bet on whether a commodity will increase in price down the road. Once locked into a contract, a futures buyer would receive a barrel of oil for the price dictated in the future contract, even if the market price was higher when the barrel was actually delivered. Artificial markets are volatile; they’re difficult to predict and can turn on a dime, according to experts who follow the markets in commodity futures.
Washington is willing to restrict our guns yet unwilling to place restrictions on those who hold guns to our heads! The gas prices are nothing less than criminal profit rape-ing!!!
How would you have them crack down that is within the framework of our Constitutionally-derived system of laws, Britt? (Not that I have any great fondness for oil speculators, I should stress.)
Paul A. Eisenstein
Publisher, TheDetroitBureau.com
Gas prices are not that high. A gallon of gas is equivalent to 33.7KWH of electricity and to get that much electricity from the grid costs a similar amount as a gallon of gas.
We should all think of how much heat our vehicles make. Over 75% of the fuel burned just goes off as heat(engine block, exhaust, radiator) before it reaches the wheels.
Sadly, Dan, you have hit the critical issue: it’s not that gasoline is that expensive relative to other fuels, it is how inefficient the Internal Combustion Engine is at using the BTUs contained within. There’s been substantial improvements and some diesels in hybrid packaging are topping 40%, but the classic gasoline model, as you noted, barely puts 25 – 32% of the energy content down to the pavement in tractive form. That’s why battery cars appear to be so much more efficient: less heat and frictional losses, along with other improvements such as aero, lightweighting and special tires.
Paul A. Eisenstein
Publisher, TheDetroitBureau.com
Fuel prices are based on supply and demand. The oil company cabal has agreed to fleece consumers for excessive profits – because they can. Yes this is akin to rape yet the bought politicians look the other way because they profit from allowing the raping of consumers.
There is a very simple solution to stop this fleecing of the public and bring petro product pricing back to reality as it is destroying world economies, not just the U.S.
For those old enough to remember…at one time the U.S. imposed an “excess profit tax” on the oil companies to reduce price gouging. The paid politicians in DC eventually were bought off and this legislation was repealed – at great expense to consumers. All the Feds need to do is impose an excess profit tax on oil companies based on a reasonable percentage profit margin. For every $1 above a threshold margin, the oil companies pay $2 in taxes. This will cap their financial greed and stimulate economic growth that has been crippled by outrageous and unconscionable fuel price increases that have no relationship to actual costs.
The same applies to Chinese imports that are destroying U.S. manufacturing and exporting millions of U.S. jobs. Place a high import tariff on all Chinse imports – as they do to imports into China and the U.S. economy will create new jobs and proper again.
While U.S. corporate CEOs may not receive $700 MILIION annual bonuses if they stop using Chinese slaves to produce Apple products, the U.S. as a country would be far better off than importing billions of dollars of Chinese crap products annually and losing millions of U.S. jobs as a result.
None of these measures will be employed to help the U.S. economy and U.S. jobs because the coporate execs who profit from unscrupulous business practices will make sure the bought and paid for criminals in DC take care of the CEOs. Yes it is criminal and why the U.S. is becoming ethically a third world country.
Wow, Jorge, I never realized you were a closet socialist.
Only kidding. I know arch Conservatives who are fed up with oil industry greed.
Paul E.