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Gasoline Prices Rise On Economic Optimism

Average price up 11 cents from last week

By Mark Huffman
ConsumerAffairs.com

May 8, 2009

All this progress and growing optimism about the economy has a downside; higher gasoline prices.

As oil traders have begun to see a light at the end of the economic tunnel, they have bid up the price of crude oil in the last two weeks and that price rise is beginning to be felt at the gas pump.

The national average price of regular self-service gasoline today is $2.169, more than 11 cents higher than the $2.054 consumers were paying a week ago. That’s a five percent increase in just seven days.

Prior to this week retail gasoline prices had remained almost constant, hovering just above the $2 a gallon mark for several weeks. A month ago the average price of gas was $2.047 and it remained near that level until this week.

For the first time since late 2008, all 50 states report average gasoline prices above $2 a gallon. The most expensive gas can be found in Alaska, at $2.597 a gallon. The cheapest gas is still in Oklahoma, with an average of $2.024 a gallon.

Motorists in California are paying an average of $2.403 a gallon today. New Yorkers are paying $2.298 a gallon.

Another factor helping drive up fuel prices is a drop in supplies, as reported this week by the U.S. Energy Information Administration. Gasoline inventories hit their lowest level since early January as motorist demand increased slightly. For most of the year refineries have been operating at just over 80 percent of capacity.

Andrew Delmege, AAA’s Manager of Regulatory Affairs, says the world price of oil is moving back toward $60 a barrel because traders are convinced global economic activity is increasing again, especially in China.

“Increasing manufacturing activity is generally a good indicator of increasing energy demand, which oil investors took as a sign of an improving global economy,” Delmege said.

“Ironically, it was a surge in oil and gasoline demand in China, as well as India, that contributed to the record high oil prices of last summer when gasoline prices topped $4.00 per gallon.”

Few analysts predict a return to $4 a gallon gasoline anytime soon, but most think gasoline prices have seen their lowest point for the foreseeable future.

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