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| Demand for Gas Soars, As Does the Price |
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September 27, 2004
There's no long-term relief in sight for higher gasoline prices.
Just when consumers were beginning to notice a slight decline in gasoline prices, the cost of filling up has gone back up again. One industry analyst who tracks fuel prices reports the national average price of a gallon of unleaded regular gasoline in late September was $1.91, an increase of about a nickel. What's behind the increase?
"Much of this is hurricane and storm related," said Trilby Lundberg, who analyzes gasoline process for the Lundberg Survey. "Prices could go back down again or stay in this range as production returns to normal."
But weather-related production and supply problems aren't the only reasons gas prices are higher, and in fact could stay high for a while. Oil prices, a leading indicator of where gasoline prices are headed, are marching higher again this week, reaching $50 a barrel on world markets. Traders are concerned about low fuel stocks as winter approaches and new concerns about security.
First, there's the ongoing insurgency in Iraq that has prevented that country of exporting as much oil as projected. There's also concern about the long-term outlook for a stable Saudi Arabia.
If that weren't bad enough, Nigeria, Africa's leading oil exporter, is being wracked by growing internal turmoil. Rebels say they plan to extend an uprising across the country's oil-producing southern delta, where the Anglo-Dutch giant Shell has evacuated more than 200 staff from two oilfields because of increasing violence.
The bad news continues. Yukos, Russia's major exporter, is beset with financial problems, and is now fighting to stay out of bankruptcy. The turmoil has already affected the company's output and deliveries.
While the supply problems mount, there is no dampening of demand. In fact, it's growing at the fastest pace in 24 years. Producers of crude oil are close to their limit, with only Saudi Arabia, the world's leading exporter, holding any significant spare capacity - around one million barrels per day. OPEC is pumping almost 30 million barrels a day, its highest level since the late 70s.
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