Pump prices aren't following oil
BY SANDY SHORE Associated Press
Tuesday, December 08, 2009
12/08/09 at 8:31 AM
Crude prices have trended lower for well over than a month and grew even cheaper Monday, which might lead some to believe prices at the pump would follow along.
That's not necessarily been the case so far.
Demand for gasoline, jet fuel and diesel is edging only slightly, but not enough for refiners to make much money so they've been cutting production to avoid losses.
Several refineries have completely shut down and while imports have helped push inventories of gasoline higher, gas prices have remained relatively flat during crude's swoon.
Auto club AAA said prices fell less than a penny, while a weekly report from the Energy Information Administration said prices rose by the same amount.
Either way, at about $2.63, a gallon now costs about 90 cents more than it did last year at this time when prices were in free fall.
Benchmark crude for January delivery fell 2 percent, or $1.54, to settle at $73.93 on the New York Mercantile Exchange, the lowest level in about two months.
Energy experts say that at some point, fuel prices are going to have to rise or crude prices are going to have to fall.
It's been the latter in recent days and the rebounding dollar may be the best ally that motorists have right now.
The dollar traded higher than it has for a month against the euro Monday and crude prices fell sharply, demonstrating how much heft the dollar has in energy markets.
Oil is bought and sold largely in dollars and this year the dollar has taken a beating compared with currencies like the euro. That has allowed investors holding euros and other stronger currencies to buy a lot more oil for less and they have.
While that has driven the price of crude higher, the same cannot be said for gasoline because the demand isn't there. That is why energy experts believe something's got to give.
With the crude falling as the dollar rises, that may finally be happening.
Consumers that want to get an early indication of where the price of gasoline, diesel and other fuels are going in the coming weeks might want to watch the movement of the dollar. The rising dollar on currency exchanges could mean more bang for the buck at the gas station.
In other Nymex trading in January contracts, heating oil fell 1.71 cents to settle at $2.0097.