Newspaper article The Florida Times Union

Will Rising Oil Prices Hit Hard at the Pump? Maybe

Newspaper article The Florida Times Union

Will Rising Oil Prices Hit Hard at the Pump? Maybe

Article excerpt

CHICAGO -- Crude oil prices are rising to their highest level in nearly two years as producers show unusual cooperation in working to end world overproduction, but there's no guarantee that prices at the pump will follow.

While consumers surely must delve into their pockets for gasoline purchases, a number of variables make it difficult to determine just how deep they will have to dig, industry observers said yesterday.

"It's just a wait-and-see game," AAA spokesman Mitch Fuqua said. "There are so many factors involved, including whether the gas station down the street wants to compete with his neighbor on trying to get increased driving demand through competitive prices, or by raising prices."

Retail gasoline prices fluctuate based on demand, competitive issues, taxes in a geographical region, refinery production and capacity, and both present and anticipated future crude oil prices.

For example, prices at the pump fell nationwide by an average of 5 cents between early May and early June -- despite tightening inventories, which might otherwise drive up the price -- as driving demand remained weaker than expected at the start of the peak summer period.

In the most recent Lundberg Survey of 10,000 gasoline stations nationwide, the national weighted average for gasoline, including all grades and taxes, was $1.1960 on June 25, up only 0.58 cents per gallon from June 13.

Meanwhile, oil producers this week are enjoying the best prices they've seen for crude since November 1997 amid sharp declines in available supply and intense summer driving demand.

Futures prices for August crude rose 10 cents to $19.39 a barrel yesterday on the New York Mercantile Exchange, nearly double what it was trading for earlier this year.

The surge in oil prices has not translated into the same jump in gas prices, which are on average up 20 cents since February.

The recent price increase stems from an agreement in March between OPEC and other key producers, including Mexico and Norway, to cut their combined daily production by 2.7 percent, or 2.1 million barrels, beginning in April. …

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