Memorial Day: good news on gasoline prices, and it may get better
Memorial Day weekend, the start of the summer driving season, will see gasoline prices at their lowest in two years. Concerns about Europe and optimism about Iran have helped cut the cost of crude.
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Typically, US gasoline demand does not peak until July 4th, notes Sander Cohan, a principal at Energy Security Analysis Inc. in Wakefield, Mass. However, he says the ramp up to Memorial Day can “set the tone for the rest of the summer.” This year the ramp up has been characterized by gasoline prices falling for seven consecutive weeks.Skip to next paragraph
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On Wednesday, the price of crude oil – the major ingredient in producing gasoline – dropped almost $2 a barrel at one point during trading on the New York Mercantile Exchange, a futures market.
The high this year is $110 a barrel. Some energy experts said the price has been under pressure because of reports of diplomatic progress being made over access to Iran’s nuclear facilities. Because of worries about the possibility of conflict in the region, the price of oil has carried what some traders called a “risk premium” of about $20 a barrel. But, if the risk of war is diminished, that premium could come down, they say.
But, there are also some large economic forces at work as well. At a press briefing on Wednesday, John Felmy, chief economist at the American Petroleum Institute, says he suspects the decline is a continuation of the market’s reaction to the on-going Eurozone crisis, worries that Europe would go into a recession, slow US economic growth, and less robust growth from China.
Supplies could also be more ample. “We have indications, but not good data, of additional supplies from Saudi Arabia,” says Mr. Felmy.
Only two months ago, there were predictions gasoline prices would pass their all time high of $4.11 a gallon set in the summer of 2008. President Obama considered releasing oil from the Strategic Petroleum Reserve. Republican candidate Newt Gingrich claimed he would bring the price down $2.50 a gallon.
“Since gasoline prices have started to decline no one is saying gasoline prices will be an election issue,” says Mr. Lenard. “Yes, gasoline prices are still too high, but things are looking up.”