State’s gas prices exceed $2 a gallon
California’s average gasoline price has risen past $2 a gallon and oil prices are back above $40 a barrel, separate reports showed Wednesday.
Gasoline prices continued to increase around the country, according to an Energy Department survey of filling stations. The average U.S. price for a gallon of self-serve regular gasoline rose 6.3 cents to $1.847 in the week ended Monday, in a report delayed two days by the Martin Luther King Jr. holiday and the presidential inauguration. California’s average increased 7.6 cents to $2.064 a gallon.
The daily survey of gasoline prices in the AAA fuel gauge report, compiled by the Oil Price Information Service and Wright Express, showed gasoline at $1.848 a gallon nationally Wednesday, up 18.5 cents in the last month. California’s average was $2.083 a gallon, up 28.2 cents in the last month.
Brian Hanable, a 41-year-old Redondo Beach graphic artist for the film industry, said he had just begun to feel comfortable going to the gasoline station again. Now, rising fuel prices are “just one more thing to cause a headache in everyday life. One more little stress” in the midst of a still-horrifying economy, Hanable said.
“It would be such a perfect world if gas prices would stay somewhat level for more than a month instead of this constant up and down and up and down for such a long time,” Hanable said.
Crude oil futures Wednesday climbed more than 6% on hopes that a new economic stimulus package would boost demand. In addition, refiners have reduced production for maintenance and profit reasons.
In New York futures trading, crude oil for March delivery closed at $43.55 a barrel, up $2.71.
Analysts differed sharply on where oil prices are headed.
Those making the case for lower prices point to trading in contracts for later months, such as those for April, May and June delivery, which have been in what traders call contango -- that’s not a dance step, but a situation in which oil futures contracts in each successive month sell at higher and higher prices. Analysts said that encourages buyers to grab and hold supplies for sale at a future date when prices are expected to be significantly higher.
Contango all but evaporated Wednesday, with the gap between contracts narrowing. And since hoarders were running out of cheap storage space, it made little sense to keep buying.
Sean Brodrick, a natural resources analyst for Weiss Research’s online newsletter Money and Markets, said that all of that surplus oil -- 80 million barrels of it alone on tankers turned into makeshift storage units -- will have to be sold at some point, which would drive prices lower.
“Oil could be headed to $25 a barrel,” Brodrick said.
Another analyst said that the foundation for the next big surge in oil prices was already being set.
Citing dramatic cuts in capital spending by major oil companies, including ConocoPhillips and Canada’s Suncor Energy Inc., Fadel Gheit, senior energy analyst for Oppenheimer & Co., said the oil industry wouldn’t be ready to respond once the global economy kicks into high gear again.
“Capital spending is needed just to keep things from falling apart and to prevent production declines,” Gheit said. “These capital spending cuts will have a more immediate impact on reducing supply than any production cuts made by the oil producers.”
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