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Gas prices may cause sticker shock, but not historically high - yet Sunday, May 6, 2007 By Jason Wiest Arkansas News Bureau LITTLE ROCK - A 40 percent increase in retail gasoline prices over the past three months may have Arkansans grumbling, but motorists in the state are shelling out barely more for fuel than they did a year ago. Prices in Arkansas at the end of January were near the $2 per gallon mark, according to AAA's Daily Fuel Gauge Report. Excluding a fairly steady period in March when prices hovered around $2.40 a gallon, the cost of gas has steadily risen to Friday's average price of $2.87. "That's a pretty substantial jump, but it's not as high as it was the summer of '06 when it was over $3," said Mark Thompson, economic forecaster for the University of Arkansas at Little Rock's Institute for Economic Advancement. Only in recent days have gas prices edged over year-ago averages. In May 2006, the Arkansas average price of unleaded regular was near $2.70 a gallon, so the current cost is not outrageous from a historical standpoint, Thompson said. But each day, gasoline prices continue to rise, and some analysts are cautioning that the U.S. prices could hit record highs this summer. Thompson cited familiar culprits for the recent increases - unplanned refinery outages, the summer travel season, geo-political risks, shortages with overseas suppliers and general market uncertainty. "There's nothing special this year versus previous years when we've had some of that that's led oil prices to go up," Thomas said. A Feb. 16 explosion and fire that shut down Valero Energy Corp.'s McKee refinery in Sunray, Texas, "put a significant crimp in output," said Mike Right, AAA's vice president of public affairs. Consumers will also feel the affect of a fire that was still raging last week at a 50,000 barrel-a-day refinery in Oklahoma, Right said. "Any kink in the system is going to cause a problem because refining in the U.S. is quite tight," he said. U.S. gasoline inventories have fallen for 12 weeks in a row, part of the reason the national average for a gallon of gasoline had risen to $3.01 by Friday. Gasoline stockpiles unexpectedly dropped by 2.8 million barrels and stated refinery use declined to 87.8 percent of capacity, according to a recent U.S. Department of Energy report. Gasoline inventories are at their lowest level in two decades for this time of year, and no new refineries have been built in the last three decades, Right said. This year, the U.S. market might not be able to rely heavily on European gasoline stockpiles as it did after the 2005 hurricane season, Right said. Europe's gasoline inventories in February were 114.2 million barrels, down 11 percent from two years ago, the International Energy Agency in Paris reported. The U.S. already imports about 10 percent of its gasoline, and as supply stretches even thinner, demand is slowly creeping upward, Right said. Average gas consumption during the summer travel season, from April through September, is expected to be about 9.5 million barrels per day, about 1.2 percent above the 2006 summer season, according to a U.S. Department of Energy report April 10. The report also said the seasonal increase in gasoline prices began about a month early. The department's next update is expected Tuesday. Population growth and a strong economy continue to drive demand upward, although at a slower rate than in the past, Right said. In its April report, the Energy Department projected that the average monthly gasoline pump price would peak in May at $2.87 per gallon, compared with $2.98 per gallon in July last year. The summer average was projected to be $2.81 per gallon, compared to $2.84 per gallon last year. "We started off the spring with low inventories of product and at the same time we saw a noticeable increase in demand," Right said, noting that the report's numbers indicate the Energy Department predicted it would be a temporary situation and that supply would catch up to demand. "Looks like they were too optimistic," he said. It's tough to predict what gas prices will be in the future, except that they'll be volatile, Thompson said. "I know they're going to come down, they're going to come back up, but I don't see any factor that shows that, yes, the trend is going to be coming down," Thompson said. "It wouldn't surprise me if they could come down in the fall and winter in the $2.80 range if oil prices are down in the $62 to $65 per barrel range." Friday's per barrel closing price for light, sweet crude for June delivery was $61.93, down $1.26. "You have that summer component, so it's hard to say that I see any push downward on gasoline prices until the fall," he said. Thompson noted some forecasters are predicting a downward trend, "but not in 2007 and not by a whole lot." As far as a return to prices near the $2 per gallon average Arkansas consumers enjoyed just three months ago: "I don't see that anytime soon," Thompson said. "I guess I'll leave it at that." |
