AAA Fuel Gauge Report Overview
By Avery Ash
Manager, Federal Relations
Monday, July 9, 2012
Today’s national average price for a gallon of regular self-serve gasoline is $3.38. After declining for 75 of 77 days, the national average has now risen every day for a week. Today also marks the first time since early April that the national price at the pump begins a week more expensive than it was a week prior.
While today’s national average is five cents higher than the price one week ago, it remains 17 cents cheaper than one month ago, 24 cents cheaper than one year ago, and 56 cents cheaper than the year-to-date peak price of $3.94 in early April.
This reversal in a trend of falling prices at the pump to begin July is not a unique phenomenon. In 2011, prices declined for 52 of 56 days, falling 44 cents from a peak of $3.98 on May 5 to a summer low of $3.54 on June 30. July 2011 saw prices rise 17 cents and then remain elevated through Labor Day (September 5) and the end to the busy summer driving period. From September 6 until December 21, 2011, the national average steadily declined, falling 46 cents to $3.21 per gallon. The low price to-date for the summer of 2012 came on July 2 at $3.33 and the national average is currently five cents above that low.
While drivers in 33 states and the District of Columbia have seen prices increase on the week, the increase has been most dramatic in the Midwest. States in this region have seen average prices rise by more than a dime on the week (Michigan – 12 cents; Illinois – 14 cents; and Kentucky – 16 cents) led by 26 cent increases in both Indiana and Ohio. While these states have seen the largest rise in pump prices over the last week, they are also among those that saw the largest decline during the month of June.
The spring decline in gasoline prices was driven largely by lower global crude oil prices. The price of West Texas Intermediate (WTI) crude oil fell nearly $30 per barrel from $107.33 on March 27 to $77.69 on June 28. This decline came amid a slew of concerns surrounding global economic weakness including persistent sovereign debt worries in Europe, signs of a slowing economy in China, and bearish economic data in the United States. A weaker global economy would be expected to consume less crude oil, which puts downward pressure on prices.
To begin July, these concerns for global crude oil demand have taken a back-seat to supply concerns, which has keyed the recent increase in oil prices. After registering the fourth largest one-day increase on record on June 29 ($7.27 per barrel), the price of WTI increased to a settlement of $87.66 last Tuesday as geopolitical tensions with Iran were again front-page news and oil workers continued to strike in Norway.
After several months of easing tensions, Iran was in the news again last week as the Iranian government responded to western sanctions on Iranian oil imports with military drills and reports that the country might interfere with oil distribution through the Strait of Hormuz, through which one-third of global seaborne oil is transported. The increased possibility of disruption to supply in the region puts upward pressure on prices. Additionally, worker strikes continued at the Statoil plant in Norway, which produces some 1.2 million barrels of crude oil per day. With global supply already tight following sanctions on Iran, additional supply disruptions would be expected to put upward pressure on oil prices.
Bearish global economic news, including weak U.S. jobs numbers, pressured prices slightly lower to end last week following the July 4 holiday, but upward pressure from global supply concerns saw prices again turn higher today. WTI crude oil prices increased $1.54 per barrel today to settle at $85.99 at the close of formal trading on the NYMEX.