Gas prices on rise because of greater demand for crude oil

Michael Jacobs gritted his teeth Christmas Eve morning and pumped $15 worth of gasoline into his truck at the Rhodes 101 on Sprigg Street.

Jacobs, 20, from Thebes, Ill., said he wanted to fill up before prices went any higher than the $2.87 per gallon they were Friday. He said his daily commute from Thebes to Cape Girardeau is getting expensive.

"Twenty minutes here and there, it's been killing me," Jacobs said.

Just in time for the holiday traveling season, gas prices are jumping. And thanks to rising demand, prices could be going up for some time.

Average gas prices nationally topped $3 a gallon late last week, up 16 percent from $2.58 a year ago, according to AAA. In Missouri, the average price for a gallon of regular unleaded gasoline topped $2.84 Thursday, an increase of 45 cents from the same time last year. Prices in some of Missouri's metro areas have approached $3 per gallon in recent days.

Around Cape Girardeau, gasoline prices were approaching $2.90 per gallon at several convenience stores, and as high as $2.95 at locations near the interstate over the Christmas weekend.

Gasoline prices typically rise during the summer driving season, then drop off after Labor Day.

But not this year.

The national average price for a gallon of regular gasoline has climbed more than 30 cents since Labor Day, according to the U.S. Energy Information Administration. It's the largest increase over the period since 1990, when EIA began publishing weekly gasoline price data.

"Looks like they'll continue to head north," said Mike Right, vice president of public affairs for AAA of Missouri.

Right said the main culprit is the rising price of crude oil, which pushed past $91 a barrel late last week, up from about $80 a barrel in August. Prices for a time neared $95 a barrel in London trade on Christmas Eve. The cost of oil accounts for about 60 percent of the price of gasoline.

"A lot of money is going into the commodities market right now, particularly in petroleum," Right said. "The speculators are back into it, and they're thinking the demand in the U.S. and, more importantly China and India, is going up."

At the same time, gasoline supply is tightening in the U.S., according to EIA. Production slowdowns in Canada, coupled with port and refinery strikes in France in recent months, have limited gasoline imports. Consequently, inventory levels on the East Coast are nearly 3 million barrels under the five-year average, according to EIA's This Week in Petroleum.

"Oil analysts are suggesting crude oil will be over $100 a barrel in 2011," Wright said. "It's a very volatile market, just terrible."

The good news perhaps is that rising energy demand points to an uptick in production. But surging gasoline prices could be a major blow to a U.S. economy in the midst of sluggish recovery, Right said.

"It's a difficult balancing act because the higher the price of crude, the higher the cost of gasoline and the more downward pressure that will place on the economy," he said.

It is highly unlikely, energy analysts say, that crude prices will soar to the record $150 per barrel level of a couple of years ago, when average gasoline prices in Missouri hit a peak $3.95 on July 16, 2008, and topped $4 per gallon nationally.

Lori Martin, a clerk at Kidd's Convenience Store, 1325 Broadway, said motorists have the usual complaints about the rising gas prices.

"A lot of our customers believe it's just [due to] the holidays," she said.

While AAA estimates 92.3 million Americans will travel 50 miles or more over the year-end holiday season, an increase of 3 percent from last year, Right said holidays have little to do with gas prices. Demand, or speculation about demand in recent years, is a big factor. But the biggest determinant of price, Right said, is the cost of crude.

"If that's heading down before a holiday, gas prices will go down. If crude goes up, chances are prices will go up," he said.

For motorists like Jacobs, gasoline expenses are adding up -- quickly.

"It's not helping," he said. "It just keeps going up."

mkittle@semissourian.com

388-3627

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