Gasoline prices were up Memorial Day weekend, but motorists should not experience the historic highs of one year ago, said a Purdue University agricultural economist.
Pump prices traditionally rise in late May with the beginning of the summer driving season, said Wally Tyner, who specializes in energy production and policy.
“For the rest of the summer, we can expect to see gasoline prices higher than this spring, but nothing like last summer,” Tyner said. “Today, gasoline is $1.35 less per gallon than this time last year. Gasoline prices this summer likely will stay in the $2 to $3 dollar-per-gallon range and not come near the $4 seen last year.”
A combination of factors is driving gas prices higher, Tyner said.
“First, there are higher oil prices,” he said. “Crude oil is now around $60 per barrel, driven by signs of economic recovery and by violence in Nigeria — an important supplier of crude for the United States.
“In addition, the falling U.S. dollar means that much of the rest of the world is not seeing the higher crude oil prices in their own currency, so they are not seeing higher gasoline or diesel prices.”
The poor economy also is having an effect on gas prices, and could for some time to come, Tyner said.
“Even though there are ‘green shoots’ evidencing prospects for eventual economic recovery, we will continue to be in recession through the summer and into fall,” he said. “Overall demand for petroleum products is still down quite a bit, led by a decline in jet fuel demand of more than 10%. Gasoline demand had been down 3.5%, but recently demand has picked up so that we are only down about 1%, leading to higher gasoline prices.
“From December 2008 until this May, gasoline had been priced lower relative to crude oil than by historic norms. But today, even though crude oil stocks are still high, gasoline inventories are now considerably lower than historic norms. In essence, gasoline prices have now caught up with crude oil prices.”