- Neal Boortz defends Hillary Clinton for representing child rapist
- House task force to recommend National Guard on border, faster deportations
- Top federal judge uses pizza to explain complex Obamacare situation
- Obama, Biden overhaul job training programs
- Drought-plagued Californians turn to paint to keep lawns green
- ISIL now forcing Iraqi shopkeepers to veil mannequins in Mosul
- 11 parents of Nigeria’s abducted girls die
- Genetic mapping triggers new hope on schizophrenia
- Turkish P.M. Erdogan won’t speak to Obama, but he’ll take calls from Biden
- Israel’s ambassador praises Obama, slams Human Rights Watch report
Gas prices stall early in season
Iran tensions, demand ease up
Question of the Day
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.
“The advance in [pump] prices stalled before the $4-per-gallon level,” which is important, he said, because $4 is a flash point not only for consumers wary of high prices but also for traders who were increasingly concerned about “political intervention” in the market.
The White House and allies in Europe were considering anti-speculation measures like those announced Tuesday and a release of strategic petroleum reserves to curb the rise in crude oil prices.
The recent decline in gas prices, Mr. Horsnell said, “is likely to draw a lot of the sting and political interest out of oil prices,” and enable the market to “sidle a bit further away from the center of the political radar” where the glare of publicity had grown increasingly uncomfortable for investors and traders.
Whether the stabilization in prices and anti-speculation measures will take the heat off Mr. Obama from Republicans remained in doubt, however, as House Speaker John A. Boehner of Ohio vowed to keep bringing up legislation to allow more drilling than the administration has allowed on public lands.
Another factor adding to prices in the Washington area and the Northeast this spring were fears that a major refinery in Philadelphia would shut this summer after the closure of several smaller refineries in the area last year.
Sunoco announced that it would close the refinery, which produces nearly one-quarter of the oil products consumed in the Northeast, if it didn’t find a buyer by July 1 - a development that threatened to create major disruptions in supply and drive up prices even further in the region.
But industry reports last week said at least four potential buyers have emerged for the big Philadelphia refinery, as well as for smaller ones that have been shuttered.
“The entire dynamic of the U.S. East Coast markets may be about to change,” said Tom Kloza, chief oil analyst with the Oil Price Information Service.
© Copyright 2014 The Washington Times, LLC. Click here for reprint permission.
About the Author
- Economists see signs of another market bubble
- Crude oil will head north of the border to Canada
- S&P: Boeing to suffer if Ex-Im Bank killed
- U.S. job gains, unemployment dip push markets into record territory
- Unemployment falls to 6.1 percent amid U.S. hiring surge
Latest Blog Entries
TWT Video Picks
U.S. appetite for drugs begets violence migrants are fleeing
- IRS seeks help destroying another 3,200 computer hard drives
- D.C. appeals panel deals big blow to Obamacare subsidies
- 'Straight White Guy Festival' supposedly set for Ohio park
- Rick Perry: County jails in Texas have taken in 203,000 "criminal aliens"
- Hamas terrorists wear Israeli army uniforms to ambush soldiers in Gaza
- ISTOOK: The secret is out: 'Unaccompanied minors' are only one-fourth of illegal border-crossers
- Jewish woman booted from JetBlue flight over fight with Palestinian
- Tony Dungy doubles down on Michael Sam remarks: 'Drafting him would bring much distraction'
- Obama family set to buy $4.25M desert home in California: report
- Rep. Jared Polis' anti-fracking crusade riles Colorado
Obama's biggest White House 'fails'
Celebrities turned politicians
Athletes turned actors
20 gadgets that changed the world
Fighting in Iraq