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.
Show commenting policy
TribLive commenting policy
You are solely responsible for your comments and by using TribLive.com you agree to our Terms of Service.
We moderate comments. Our goal is to provide substantive commentary for a general readership. By screening submissions, we provide a space where readers can share intelligent and informed commentary that enhances the quality of our news and information.
While most comments will be posted if they are on-topic and not abusive, moderating decisions are subjective. We will make them as carefully and consistently as we can. Because of the volume of reader comments, we cannot review individual moderation decisions with readers.
We value thoughtful comments representing a range of views that make their point quickly and politely. We make an effort to protect discussions from repeated comments either by the same reader or different readers.
We follow the same standards for taste as the daily newspaper. A few things we won't tolerate: personal attacks, obscenity, vulgarity, profanity (including expletives and letters followed by dashes), commercial promotion, impersonations, incoherence, proselytizing and SHOUTING. Don't include URLs to Web sites.
We do not edit comments. They are either approved or deleted. We reserve the right to edit a comment that is quoted or excerpted in an article. In this case, we may fix spelling and punctuation.
We welcome strong opinions and criticism of our work, but we don't want comments to become bogged down with discussions of our policies and we will moderate accordingly.
We appreciate it when readers and people quoted in articles or blog posts point out errors of fact or emphasis and will investigate all assertions. But these suggestions should be sent via e-mail. To avoid distracting other readers, we won't publish comments that suggest a correction. Instead, corrections will be made in a blog post or in an article.
- Cost-cutting at Kraft Heinz extends to refrigerator
- Kennametal expects to consolidate plants as it shrinks manufacturing in continuing streamlining; profit drops
- Invasive beetle costs Pittsburgh-area power companies plenty
- GNC to convert more stores to franchises as sales, profits slip
- Taxpayers may owe billions in student loans
- Muni bond funds stressed
- Range Resources cuts workforce 11%
- U.S. asks Supreme Court to reinstate convictions of portfolio managers who won on appeal
- Home rental prices jumped again in June
- PPG puts brand 1st in strategy to reach commercial paint market
- Economy’s 2Q best since last year