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U.S. Oil Supplies Fall As Prices Keep Rising

National average well over $2.50 a gallon

By Mark Huffman
ConsumerAffairs.com

June 10, 2009
It seems more and more likely that any economic recovery later this year will also bring sharply higher energy prices.

Though the economy officially remains in a recession, there have been scattered signs of improvement. At the same time, demand for energy — in particular gasoline and diesel fuel — have started climbing again.

In the last week, inventories of U.S. crude oil fell by 4.4 million barrels, according to the U.S. Energy Information Administration. After several weeks of declines, many analysts expected supplies to level off. That hasn't happened.

In the week ending June 5, the U.S. imported less oil, with imports dropping 676,000 barrels a day. Meanwhile, demand for gasoline continued to rise slightly.

The agency also reported that U.S. Inventories of gasoline fell by 1.6 million barrels, while distillate stocks fell by 300,000 barrels.

Declining stockpiles and increasing demand is not a good combination for consumers. Oil prices continued higher Wednesday, jumping to more than $71 a barrel after the EIA report came out.

The price of oil has more than doubled from the lows in the mid $30s early in the year. The price has been pushed higher by tighter supplies, caused by OPRC-imposed production curbs, as well as oil traders' belief that the economy is recovering, which will continue to drive up demand.

OPEC has made no secret of its effort to raise prices, saying it needs a market price between $60 and $80 to maintain positive revenue flow. Kuwait's oil minister says producers can increase production if prices escalate to the point they are harming the feeble global recovery.

Meantime, U.S. consumers are seeing prices continue to climb at the gas pump. The national average price of self-serve regular is $2.627 a gallon Wednesday, according to AAA.

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