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U.S. Swimming In Gasoline Supplies

Market surprised by falling gasoline demand

July 2, 2009

On Thursday the average price of gasoline is $2.629 a gallon, down every day since peaking at $2.70 11 days ago. The average price of diesel is also $2.629 a gallon.

On Wednesday the U.S. Energy Information Administration reported that, for the week ending June 26, gasoline inventories rose 2.3 million barrels. That took industry analysts by surprise, since they anticipated an increase in summer driving would draw inventories down by two million barrels.

But that increased demand hasn't materialized. On a weekly basis, the EIA numbers show that demand for both gasoline and distillate actually declined. The drop was all the more surprising, coming just before the July 4th holiday, when driving nears its peak.

The declines were felt on the mercantile markets, which ultimately impacts the prices consumers pay. Traders backed away from crude, sending the price below $70 a barrel. Gasoline and heating oil futures prices decline in the wake of the report, as traders hedged their bets.

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