Skip to content
Retail gasoline prices climb sharply
Retail gasoline prices have jumped sharply over the last week, prompting worries that a surge in energy prices could slow the economic recovery.
The average price of a gallon of regular gasoline in California climbed 5.9 cents to $3.046, the biggest rise in 16 weeks. Nationally, the price jumped 8.6 cents to $2.751 a gallon, according to the U.S. government's weekly survey of filling stations.
Analysts said gasoline prices were rising sharply while most indicators of supply and demand were headed in the opposite direction.
The nation's oil supplies were nearly 2 million barrels higher, at 325.4 million barrels, than they were during the same week last year, according to Energy Information Administration statistics. A year earlier, gasoline was selling for $1.988 on average in California and for $1.784 a gallon nationally.
Gasoline supplies in the U.S. are even more plentiful, at 219.7 million barrels, up from 211.4 million barrels a year earlier. Demand for gasoline was also running lower than it was in January 2009, at 8.7 million barrels a day compared with 9 million barrels a year earlier.
Crude oil futures for February delivery reached $83.95 a barrel Monday before the rally lost steam and ended the day down 23 cents at $82.52 on the New York Mercantile Exchange. That's more than $40 a barrel more than it was at the same time last year.
Experts such as Fadel Gheit, senior oil analyst for Oppenheimer & Co., called the numbers "a good example of prices disconnected from market fundamentals of supply and demand, as was the case 18 months ago when oil prices peaked above $147 a barrel."
Gheit added that oil prices have remained elevated "despite high inventories, weak demand and the largest OPEC spare capacity in years. Refining capacity utilization is the lowest in 20 years because of oversupply and weak demand."
Weiss Research Inc. energy analyst Sean Brodrick said that market bulls seized on promising economic numbers from China to drive oil to nearly $84 a barrel earlier in the day.
China's customs bureau said on its website Sunday that the country's exports were up 17.7% in December compared with a year earlier. Imports jumped 55.9% last month compared with December 2008, the customs bureau said.
Phil Flynn, an analyst at PFGBest Research, said renewed attacks on oil installations in Nigeria and tension over Iran's nuclear program also combined to drive oil higher at first. Flynn and others said oil could reach $95 a barrel in the coming weeks. "At some point it will hurt the economic recovery," he said.
Brodrick said he expected oil prices to rise and fall sharply in 2010, as markets overreact to world events and indicators of global economic strength. That kind of volatility would make life difficult for any business with significant energy costs.
"It will be very hard on any business that is trying to hedge its bets on what its fuel costs will be in 2010," Brodrick said.