National gas pump prices at record high on supply concerns
Lowest prices in Rocky Mountains and parts of Midwest
Saturday, January 21, 2012
Americans aren’t likely to find much relief from high prices at the gas pump as they go about paying their post-holiday bills.
Retail gas prices are at their highest levels ever for this time of year despite ample supplies and declining demand. That’s because tension in the Persian Gulf has kept crude oil prices around $100 per barrel for most of the month.
Analysts say oil prices are likely to remain at those levels until there is more clarity about what will happen in the Gulf, where Iran has threatened to close the Strait of Hormuz if the U.S. and other countries impose more sanctions on its nuclear program.
Iranian imports are banned in the U.S., but Iran supplies 2.2 million barrels per day to the rest of the world, mainly Asia and Europe.
Both oil and gasoline futures have moved in a narrow range for most of the month. In addition to the Iranian situation, investors are concerned about the European debt crisis and whether it will impact the global economy.
European Union foreign ministers are expected to discuss possible sanctions against Iran, including an oil embargo, at a Monday meeting. Many analysts doubt that Iran could set up a blockade without swift military intervention from the U.S., but any supply shortages would cause oil supplies to tighten.
The national average for gasoline was $3.382 per gallon Friday, which was about 17 cents more than it was a month ago and nearly 27 cents more than a year ago, according to AAA, Wright Express and the Oil Price Information Service. Drivers in California, Illinois and parts of the Northeast paid the highest prices while the lowest prices were in the Rocky Mountains and parts of the Midwest.
Gas prices will go up or down based on what happens with Iran, PFGBest analsyt Phil Flynn said. If the situation calms down, retail gas prices could fall from 25 cents to 50 cents a gallon. If the situation intensifies, prices could increase by the same amount.
“It’s that much of a wild card,” Flynn said. “I think it’s a very volatile situation and I think we could go either way.”
High gas prices have been affected in previous years by a stronger economy because consumers have more to spend on filling their tanks. Although the U.S. economy is improving slowly, Flynn said many consumers still have habits that they picked up during the recession — such as watching how much they spend on gas and finding ways to combine trips in the car.
The Energy Department said this week that crude supplies fell slightly last week but remain above the average level for this time of year. Gasoline supplies rose with demand for gasoline over the four weeks ended Jan. 13 about 6 percent lower than a year ago.
In a sign of weaker demand for oil and gas, Hovensa LLC this week announced plans to close a major refinery in the U.S. Virgin Islands next month that produced about 350,000 barrels per day. The company has incurred losses of $1.3 billion over the past three years and expected losses to continue in the slower global economy. That could lead to tighter supplies in the months ahead, Flynn said.
Flynn and other analysts have speculated that the national average for gas could reach $4 per gallon by spring, ahead of the summer driving season. Refiners will switch to more expensive anti-smog blends during the warmer summer months. The average price of gas was almost $4 a gallon last May when oil hit $114 a barrel.
Benchmark oil fell $2.21 to end at $98.33 per barrel Friday in New York. The price has ranged from about $98 per barrel to around $103 per barrel this month. Brent crude fell $1.69 to finish at $109.86 per barrel in London.
In other trading, natural gas fell 2 cents to finish at $2.34 per 1,000 cubic feet. The price remains near a 10-year low because a mild winter for much of the U.S. has cut demand and supplies are plentiful. Heating oil fell 5 cents to end at $2.99 per gallon. Gasoline futures fell 3 cents to finish at $2.78 per gallon.
AP Energy Writer Chris Kahn contributed to this report.