USA - 3-Cent Spike in Gas Prices May Signal Short Period of Increases
HOUSTON — National gasoline prices spiked on Friday by 3 cents a gallon, an unusual one-day jump that many energy experts say probably signals at least a week or two of higher prices at the pump as the summer driving season picks up.
Gasoline prices have been rising recently, mainly as a result of higher global crude prices that have been creeping up because of the unrest in Egypt, brief export failures in Libya and Iraq and disruptions of Nigeria’s oil pipelines. While Egypt is not a major oil producer, instability in the country raises fears of a possible blockage of the Suez Canal, a major thoroughfare for oil exports, and spreading unrest in the region.
West Texas Intermediate, the main American benchmark, has been rising for more than a week, partly because higher demand among summer vacationers has caused a sudden large drop in American inventories. Many experts say they believe that the American benchmark price, which has been depressed relative to global benchmarks in recent years, could remain somewhat higher for a while because new pipelines and railroad lines are gradually relieving bottlenecks for oil produced and stored in the Midwest.
Growing inventories of landlocked oil in storage and delivery centers like Cushing, Okla., had made oil cheap because it was difficult to sell because of insufficient transport, but now that supplies are moving around the country more easily, wholesale and retail prices are rising.
Stockpiles in Cushing fell by 2.7 million barrels last week alone, reaching the lowest levels of the year. In recent years, a weak economy and more efficient vehicles have combined to lower American gasoline consumption, but it appears that Americans are driving substantially more this summer than last.
The average price for a gallon of regular gasoline on Friday was $3.55, roughly 7 cents higher than a week ago and 17 cents above a year ago, according to the AAA daily fuel gauge report. Prices range widely around the country; in South Carolina, for instance, a gallon of regular averages $3.21, while California drivers pay $3.99.
“We’re going to get a little sticker shock at the pump,” said Tom Kloza, chief oil analyst at GasBuddy.com, a Web site that monitors gasoline prices. “We’ve moved up on wholesale prices anywhere from 35 to 60 cents a gallon since June 28. This summer we are looking at average prices of somewhere between $3.45 and $3.75, and unfortunately I think we will approach the high end of that range pretty shortly.”
Few oil experts expect a long-term increase in oil and gasoline prices. The rapid growth in United States oil production, coupled with sluggish demand in Europe and slowing growth in China and much of the developing world, are expected to restrain prices. Some experts even predict a decline in oil prices over the next year.
“You will see oil prices hover somewhere in the $70 to $100 range,” Harbir S. Chhina, an executive vice president for Cenovus Energy, a major Canadian oil company, predicted for the United States oil benchmark in an interview last month.
The U.S. benchmark has broken out of that band for the first this year in recent days to just over $105, representing roughly a $20 rise from last July. Crude prices, in the United States and abroad, rose roughly 1 percent on Friday.
Global oil production remains robust, and some recent supply problems are easing. Two major Libyan oil export terminals that were shut down in recent weeks by militias and disgruntled employees have resumed operations. The Kirkuk-Ceyhan pipeline, a major outlet of oil from Iraq’s northern oil fields, is returning to operations this week after being suspended since June 21 because of a leak and an interruption of repair work because of an ambush on a crew of technicians.
Oil experts warn, however, that there is no telling when the next political crisis will come in the Middle East or North Africa.
“Oil price predictions used to be about oil consumption and markets but now it’s about where the next riot will break out,” said Stale Tugesvik, a senior executive at Statoil, the Norwegian oil giant. “It’s so much more politically based and that makes it a mystery to everyone.”
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