Experts: Gasoline prices could keep setting records
Rising crude oil prices and a decline in refinery output could keep retail gasoline prices high well into fall, when pump prices usually fall, experts said on Tuesday.
The average price of regular gasoline in the Pittsburgh area stood at $3.90 a gallon as of Tuesday, according to AAA East Central.
That's 2 cents under Western Pennsylvania prices a week earlier, and 7 cents under pump prices two weeks ago. But it's 53 cents above the $3.37 a gallon that motorists paid at the beginning of the year.
“The overall price of crude oil is going up, and crude is still the basic factor determining oil product prices,” said Kent Moors, scholar in residence at the Institute for Energy and the Environment at Duquesne University.
“Crude prices are essentially determined by world demand, not by U.S. demand,” Moors said. The developing world's demand for crude is fueling higher per-barrel prices, he said.
“And it's not just China. Demand in other parts of the world is spiking even higher, such as West Africa,” Moors said.
The world benchmark price for crude oil, Brent crude, is about $112 a barrel, according to the Energy Information Administration. But the Organization of Petroleum Exporting Countries, better known as OPEC, projects it will increase by year-end to about $130 a barrel, or by 16 percent.
The U.S. benchmark price for crude, West Texas Intermediate, is about $92 a barrel. OPEC expects it to rise by year-end to about $115 a barrel, or by 25 percent.
Ironically, the expectation of higher crude prices is what led to the recent dip in gasoline pump prices, Moors said. That is, refiners stocked up on the less expensive crude in recent weeks, and that ample supply of crude translated into a few cents per gallon less at the pump.
“Pittsburgh prices are down a penny or so in the past week. Gee, let's not spend the savings all at once,” said Patrick DeHaan, senior petroleum analyst for GasBuddy.com in Chicago.
DeHaan said a decline in refinery output of gasoline — especially in the Northeast, where Western Pennsylvania gets most of its petroleum products — has put upward pressure on pump prices for months.
Gasoline inventories in the Northeast stood at 46.8 million barrels on Sept. 21, the latest data available. One year earlier, they were at 56.3 million barrels, or 17 percent higher.
“So, we're in pretty rough shape,” DeHaan said. “The last time inventories were this low was in 2008.”
That year is when the nation hit its all-time high of $4.11 for a gallon of unleaded regular gasoline.
Three of the 11 oil refineries in the Northeast were idle in June, according to latest available data, DeHaan said. That compares with four of 14 sitting idle in June 2011.
DeHaan does not necessarily expect Western Pennsylvania gasoline prices to rise in the remaining months of this year, given historical patterns.
“The good news for motorists in Pittsburgh is that any significant (decrease) in production would be mitigated by the fact that demand is lower in the fall months,” he said.
“So I think prices will bottom out between Thanksgiving and Christmas,” he said. “Prices could go to an average $3.70 a gallon or lower.”
Any of several factors could disrupt that outlook, however, the experts said.
Those scenarios include: A major violent incident, or worse, between Israel and Iran; a pickup in the U.S. economy and the nation's fuel demand; and stubbornly high world demand for crude.
Thomas Olson is a staff writer for Trib Total Media. He can be reached at 412-320-7854 or firstname.lastname@example.org.