Petersburg, VA — How high will they go?
Gasoline prices, already too high for most people's liking a month ago, have continued to soar and seem to be closing in inexorably on their record high above $4 a gallon.
And while most petroleum market-watchers remain convinced that political upheaval in the Middle East and ensuing speculation on the commodities markets are behind the price increase, evidence suggests that there may be another cause that's even less likely to go away anytime soon.
On Friday morning, according to travel club AAA Midatlantic and the Oil Price Information Service, the average price for a gallon of regular unleaded in the Richmond-Petersburg metro area was $3.642. That was up from $3.625 the day before, from $3.50 a week earlier, from $3.406 a month ago and from $2.766 on the same day last year. It's still below the all-time high of $4.006 set in July 2008, but it's close enough to be causing real pain at the pump.
AAA spokesperson Windy Van Curen said the experts are still pointing the finger of blame at the unrest in the Middle East and North Africa, especially Libya, which is causing commodities traders to worry about possible supply disruptions.
However, she added, rising demand in rapidly expanding economies like that of China "is contributing to demand for oil, and whenever oil goes up, gas goes up, too."
The American Petroleum Institute, a trade group for major oil companies, also believes that unrest in the Middle East is a factor in the price increase but says the major driver of higher prices is a rebound in the global economy.
In a recent report, the organization wrote, "Now, with the worldwide economic recovery under way, demand is on the rise again but unrest in the Mideast has put supplies at risk. This combination of rising demand and reduced supply is helping to push prices higher."
The problem many observers have with that explanation is that it's hard to find any evidence of "reduced supply." According to figures from the U.S. Department of Energy's Energy Information Administration, in the week ended April 1 the available supply of crude oil in the United States was up about 0.4 percent from the same week last year.
At the same time, however, the supply of gasoline in the country was down almost 22 percent, or more than one-fifth. In other words, the supply of oil is up very slightly while the supply of gasoline is down very sharply, almost as if millions of barrels of gas have "gone missing."
The issue does not appear to be a major cutback in the nation's refining capacity. Current figures from the EIA show that refinery capacity has changed little in the past year, falling just 0.5 percent, and the companies' usage of their capacity also has fallen only slightly, to 84.4 percent from 84.5 percent.
However, a California-based nonprofit, Consumer Watchdog, recently provided a clue to where the "missing" gasoline may have gone.
Recently, Judy Dugan, a petroleum market commentator for Consumer Watchdog, noted that the shares of oil refiners jumped in price last month "on bets that Japan would soon have to import a lot more heating oil and gasoline because of refinery fires and quake/ tsunami damage."
Dugan noted that the biggest gain was posted by one Texas-based refiner, Valero Energy Corp., whose stock price jumped 6 percent in one day. She explained that the company's refineries "are all in the U.S West Coast region, and it is most able to get gasoline, diesel and heating oil onto tankers headed to Asia."
In short, U.S. refinery capacity and usage may be staying high because the refiners are indeed producing gasoline and other fuels, but not for U.S. motorists' cars. Instead, it's being shipped across the Pacific to China and other countries where the "worldwide economic recovery" is under way at a faster pace than in the U.S.
EIA statistics confirm that U.S. exports of petroleum products in the latest week were up 42 percent from a year ago. And while the EPA just started separately reporting U.S. gasoline exports last June, the most recent figures showed that those exports have skyrocketed by 82 percent since then.
In fact, U.S. exports of petroleum products in the latest week amounted to more than 13 percent of the nation's total refining capacity, a record high in figures going back to 1991.
Whatever the cause, the higher prices are likely to stick around a while. In its latest forecast issued Friday, the EIA predicted that gasoline prices nationally will average about $3.70 a gallon over the peak travel season from April through September.
Worse yet, the EIA noted that there's "a 25 percent probability that the national monthly average retail price for regular gasoline could exceed $4 per gallon during summer 2011."
The higher prices are hitting consumers in their wallets just when families traditionally are planning their spring break and summer vacations.
AAA's Van Curen said people who "plan for that one trip all year" are unlikely to change those plans because of fuel prices, "which are a small part of the overall cost of a trip."
However, she added, many Americans still haven't seen much benefit from the economic recovery and "a lot of people are still hurting." As a result, she said, "They may choose closer destinations or take shorter trips that don't involve as many days staying in hotels."
– Michael Buettner may be reached at 804-722-5155 or [email protected]