Gas prices rise as production fails to meet demand
Gasoline prices increased in California and much of the nation over the last week, the Energy Department said Monday, as the nation’s gasoline production again failed to keep pace with driver demand.
The retail price of a gallon of self-serve regular in California rose 4.8 cents to $2.839. A year earlier, the California average was 11 cents higher.
Nationally, the average price rose 2.2 cents to $2.818 a gallon, which was 20 cents higher than the same week in 2006. Average prices remained unusually high in the Midwest, which was up nearly a penny to $2.979 a gallon. That made it the most expensive region in the U.S. for a fill-up. The only region where prices fell was New England, with a half-cent decline to $2.722 a gallon.
Gasoline demand has been strong this summer, Energy Department data show, and production has faltered at times because of refinery problems. Analysts said the supply problem was compounded by timing. Some refineries are within a week of switching from summer to winter blend gasoline, which is a different formulation.
“They are not eager to make more summer blend to meet demand when it will be out of style within a week,” said Fred Rozell, director of retail pricing for Oil Price Information Service in New Jersey. Rozell said gas prices should fall once the transition to winter blends was complete.
Crude oil futures for October delivery were also on the rise, up 79 cents to $77.49 a barrel on the New York Mercantile Exchange, driven by tight supplies and uncertainty over today’s meeting of the Organization of the Petroleum Exporting Countries in Vienna. Analysts predicted that OPEC wouldn’t increase output -- at least officially.
“We expect no change in OPEC’s official production quota,” Fadel Gheit, senior energy analyst at Oppenheimer & Co., said in a note to investors Monday. “However, we expect ‘selective cheating’ by cartel members with large spare production capacity.”
But small increases wouldn’t be enough to bring oil prices down, Steve Platt of Archer Financial Services wrote in a note to clients Monday, adding that “world crude oil inventories and product stocks are likely to get tighter in the absence of a dramatic tailing-off in demand.”
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