Gas prices stall early in season

Iran tensions, demand ease up

Question of the Day

Should Congress make English the official language of the U.S.?

View results

Gasoline prices appear to have peaked more than a month earlier than usual this year at less than $4 a gallon, reflecting reduced tensions with Iran and declining demand for fuel in the U.S. and China, oil analysts say.

Average pump prices fell 4 cents last week to $3.90 a gallon after having peaked at $3.94 on April 6, the AAA reported. That is about a dime shy of the high point reached last year around the usual seasonal peak on Memorial Day, and 21 cents below the all-time high of $4.11, set in 2008.

Gas prices typically rise in the run-up to the peak summer driving season, which starts May 31, and then fall from late summer through the winter when consumers use less gas and do not have to buy the more expensive super-refined fuels needed to fight air pollution during the summer.

The early plateauing and decline of gas prices this month reflects diverse developments from progress in talks with Iran over its nuclear program to a decline in speculation in the gas futures market, and increased hopes that key refineries in the Northeast will not be shut down as anticipated this summer.

The White House came out gunning at the speculation factor in a show of force Tuesday as an array of regulators looked to hunt down illegal manipulation of the oil and gas markets.

“Here is some good news for the U.S. consumer for a change,” said Tom Porcelli, chief U.S. economist at RBC Capital Markets, noting that supply and demand for gas are in better balance these days, giving less ground for speculators who drove the price of gas higher earlier this year but are starting to retreat amid declining demand in the U.S., China and Europe.

“We could be in the process of putting in a short-term top in gasoline pump prices,” he said.

But, like other analysts who have closely followed gas prices for fear that they would cut into consumer spending and hurt economic growth, Mr. Porcelli cautioned that what happens in negotiations with Iran is one of the many unpredictable factors that could drive up oil and gas prices this summer.

“We must continue to be mindful of geopolitical tensions that remain in the background and approach any respite in what has been a relentless push higher in gasoline prices with caution,” he said.

It was the Iran standoff that in January launched gas prices on an early start to their usual spring run-up. Speculation that mounting demand in the U.S. and China would put pressure on world supplies depleted by a Western boycott of Iranian oil added to the price spike.

President Obama on Tuesday asked Congress to strengthen rules and enforcement against speculation in the oil and gas futures market, where investors make bets on the level of prices from one month to six months in the future.

Intense, worldwide speculation played a role in driving oil prices to all-time highs near $150 a barrel in 2008, according to several studies, and has re-emerged in commodities markets in the past year.

With top enforcement officials at the Justice Department, Treasury Department, Federal Trade Commission and Commodity Futures Trading Commission at his side, Mr. Obama sought to convince markets that the administration is serious about cracking down on illegal manipulation of prices.

But even before the White House announcement, gasoline futures prices started to drop precipitously in the past week on the New York Mercantile Exchange amid reports of a major economic slowdown in China and declining demand for gas in the U.S.

Paul Horsnell, an oil analyst with Barclays Capital, said the steep drop in gas futures prices - which fell 15 cents last week and continued to fall Tuesday despite a rise in crude oil prices - is signaling a leveling-off and eventual decline in prices at the pump in coming weeks.

Story Continues →

View Entire Story

© Copyright 2014 The Washington Times, LLC. Click here for reprint permission.

Comments
blog comments powered by Disqus
TWT Video Picks