Brian L. Milne, Refined Fuels Editor, Telvent DTN
Wholesale costs for gasoline are again moving higher across the country after a steep sell-off in late June into early July, with sharp gains realized during the first full week of July putting prices on either side of levels seen in late June.
The increase in wholesale costs is now being passed through to retail outlets, lifting pump prices higher midway through the height of the summer driving season.
The Energy Information Administration (EIA) , the statistical arm of the Department of Energy, said the U.S. average price for regular gasoline at retail outlets across the U.S. was $2.726 gallon on July 5, a three-week low. The average had surged to an 18-month high at $2.905 gallon on May 10.
There’s been a host of conflicting data during the second quarter that triggered explosive volatility not only in the oil market, but also in broader equity and currency markets, with that trend continuing early in the third quarter. April and May offered promise that a robust recovery for the U.S. economy was on track.
However, a wall was hit in early June on a string of very discouraging news on housing, jobs, consumer spending and manufacturing that soured market sentiment, with talk of a double dip recession widely discussed.
This fear was reversed almost as quickly as it materialized heading into mid-July, bolstered by bullish news out of China and on economic growth prospects by the International Monetary Fund (IMF). China said it will invest $100 billion in its infrastructure this year, which is seen sustaining a strong growth rate for the powerhouse economy, while also projected to spark increased demand for oil.
The IMF followed up with an upside revision in its world growth target from 4.1% to 4.6%, while also hiking its projections for economic growth in both China and the U.S. Sentiment was again on the upswing that triggered sharp gains in crude oil, diesel and gasoline during the week-ended July 9. To be sure, volatility in both price and market sentiment remains high, and another reversal can quickly emerge.
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Looking ahead, the EIA said in its monthly outlook for July that it expects the U.S. regular grade retail gasoline price to average $2.80 per gallon during this summer driving season, which it categorizes as running from April through September. That’s 36 cents above last summer’s average, but 12 cents below its April price forecast when oil prices were significantly higher.
About the Author
Brian L. Milne is the Refined Fuels Editor for Telvent DTN-a leading business-to-business provider of real-time commodity information services. Milne has been focused on the energy industry for more than 14 years as an analyst, journalist and editor. He can be reached at firstname.lastname@example.org.