Despite drilling, gas prices still high

The national average rose for 32 consecutive days, a streak that was snapped last week. On Monday, prices jumped again - this time by 20 cents.
Feb 25, 2013


Average retail gasoline prices in Ohio have fallen 11.0 cents per gallon in the past week, averaging $3.69 per gallon Sunday, according to GasBuddy's daily survey of 5,345 gas outlets in Ohio.

This compares with the national average that has increased 2.9 cents per gallon in the last week to $3.72 per gallon, according to gasoline price website

However, by Monday, prices were up again -- by 20 cents in some places. The average price for a gallon of regular unleaded gasoline in Norwalk was $3.89.

Including the change in gas prices in Ohio during the past week, prices Sunday were 2.5 cents per gallon higher than the same day one year ago and are 28.7 cents per gallon higher than a month ago. The national average has increased 42.0 cents per gallon during the last month and stands 9.1 cents per gallon higher than this day one year ago.

"The streak is over," Senior Petroleum Analyst Patrick DeHaan said Monday morning, prior to the latest jump in prices. "GasBuddy data showed the national average rising for 32 consecutive days, starting Jan. 20 at $3.265 per gallon, and ending Feb. 21 at $3.733 per gallon. The tide has now turned and the national average has dropped two days straight. This is certainly excellent news for disillusioned motorists but I would caution them not to get overly thrilled as prices may linger near these levels for some time."

Like locusts ravaging fertile crops, gasoline prices are soaring again and eating away at the purchasing power of ordinary Americans. And again, financial speculators appear to be a big part of the story.

Last week, when the national average pump price hit $3.74 for a gallon of unleaded gasoline, the price was a sharp 44 cents per gallon from the previous, according to the AAA's Fuel Gauge Report.

AAA's figures show the streak was higher than GasBuddy's report.

"It's the 33rd day in a row that we've seen a consecutive increase" in gasoline prices, said Nancy White, a spokeswoman for AAA, who said there are several explanations but that none seem overly convincing.

More than a passing pain, rising gasoline prices act like a tax on consumers, harming the economy by whittling away at the amount of money the consumer can spend on other things. Gasoline expenditures as a percentage of U.S. household income hit three-decade highs in 2012, and the recent spike suggests 2013 might not be much better.

It's not all supply or demand.

The rising gasoline prices come even as the United States now produces more than half the oil it consumes. In fact, the nearly 800,000 barrel-per-day increase in U.S. production output from 2011 to 2012 reflected the largest one-year jump since oil drilling began in 1859.

The U.S. Energy Information Administration projects that U.S. oil production will rise from 6.89 million barrels per day in November 2012 to 8.15 million by December 2014. At the same time, the International Energy Agency has lowered its estimates for global demand for oil. Lacking demand, OPEC, the oil-exporters cartel, has reduced production.

It all argues for lower oil prices, or at least less volatility in the price of oil and thus gasoline.

Enter financial speculation. Commercial end-users of oil such as airlines and trucking companies who once dominated 70 percent of the market for market for future deliveries of oil now represent just 30 percent. Non-commercial financial speculators now dominate 70 percent of the market. The trading is dominated by Wall Street banks, hedge funds and other financial institutions that have no intention to take delivery of the oil needed to make gasoline.

"It's speculators who are moving markets," said Bart Chilton, a commissioner at the Commodity Futures Trading Commission. "They are almost exclusively the entire market at certain periods of time."

Chilton led the charge in seeking limits that reduced how much of the market for crude oil any single trader or company could control. Armed with the 2010 revamp of financial regulation, the commission sought to establish hard limits, but that effort is now bogged down in the courts.

"The more textured view would show you that at certain times it is not a question to whether or not speculators are moving the market. Speculators are the market," he said.

Other forces are at work as well.

Nearly 1 million barrels a day of capacity has been turned off, with eight refinery closures or announced closures on the U.S. East Coast and the Caribbean over the past year.

"What the market is really pricing in is potentially a new era of tighter gasoline supplies that are heavily reliant on imports," said John Kilduff, a partner in the energy trading firm Again Capital in New York. "We might not ever turn back from these high prices. This isn't episodic."

Another factor is that refiners that turn oil into gasoline have chosen to switch to their summer blends much earlier than normal. This switch, which stops or slows production for a period of time, usually happens closer to the spring break driving season in mid- to late March.

Last year, gasoline prices peaked on April 5 and 6, so AAA is hoping that an early switchover may also mean an early peak to gasoline prices and that they may tumble later in the year.

The trade association for refiners, the American Fuel & Petrochemical Manufacturers, is unaware of any large-scale early switch away from winter fuels, said Joanne Shore, the group's chief industry analyst.

"We don't have information on that explicitly," she said, noting that the association doesn't keep real-time production data. California, Shore said, switches to summer fuels earlier than the rest of the nation, adding that some California refiners are undergoing maintenance and it's been "one of the factors that has tightened (up) the Southern California market a bit."


By Kevin G. Hall - McClatchy Newspapers (MCT)

(c)2013 McClatchy Washington Bureau

Visit the McClatchy Washington Bureau at

Distributed by MCT Information Services



Despite Drilling???? The only new place they are drilling is in North Dakota. and without the keystone pipeline the only way to get the gas and oil moved to the refineries is by rail, and which Burlington Northern is the only rail co. with land/tracks/rights.. and wouldn't you know the rail is owned by none other than Warren Buffet.. The Obama buddy.. Does anyone smell a scam.... does ANYONE wonder why the Pres doesn't want/holding out as long as possible on the pipeline...and i'm just an ignorant trucker and i can see this picture...... I just love a clear, honest and transparent administration.


Lotsa drilling in TX and OK too. Mexico may open up to wildcatters.

Go back a couple years and to the shrill Democrats, the ol' oil guys, Misters Bush and Cheney were responsible for high gas prices, but somehow today, Mr. Obama doesn't have the power to control 'em. What happened?


One of your statements are correct. "Ignorant trucker". Don't worry, apparently no one else who commented bothered to read the article either. Its just a obama this or bush that. Speculation has driven the fluctuations in gas prices since desert storm. Everyone's idea that if there's a new pipeline or more drilling that gas prices will drop are "pipe dreams". No one person can change this. Its not a supply and demand thing anymore. Try rereading the article, it "might" help with that ignorance thing. 10-4 good buddy.Roll on. "Speculators are the market.


But the story does say that OPEC has cut production. So if OPEC produces more then price should go down. At least it has always worked that way. When Bush was in he would push for more production. Obama does nothing.


The story also says "it's not all supply or demand". Put an end to a war and demand would probably drop significantly. Speculators are the market.

Estrella Damm

Gas was $1.87 52 month ago.


On July 7th, 2008 (about 55.5 months ago) gas was $4.11/gallon (U.S. avg). What is your point?


Buckeye, I notice the price WENT DONE under bush's policies after that high.
HOW? Bush announced that his administration would open more areas for drilling.
Obama enters office and announced closing those areas down to drilling and then we have years of high gas prices.
Stop being such a blind partisan slave.


Hey Buckeye....under Bush, or Obama.. if you take all the months Obama has been in office and all the months Bush has been in office....and take the avg. of what gas was under their administration. Bush wins in a landslide. Gas has been consistently on a CRAZY high under Obama.


I'm not even going to pretend to know the politics around this but I have just one question. When Bush was in office and gas went up he would pressure OPEC to pump more or whatever was needed. Why do we never here about Obama pressuring OPEC or the other nations to put more on the market?


Gotta basically divorce oil and refining.

Yes, the price of oil ultimately affects the price of gasoline. But lack of refining capacity and the change over (re-tooling) from winter heating oil to summer gasoline production is affecting the market.

Remember: A lot of the east coast doesn't use nat gas, they use heating oil.


Older east coast refineries are shuttering.

I read where almost 1/3 of the gasoline on the east coast is imported. Saudi Arabia and others have built refineries, while a new one in the U.S. has not been built for almost 30 yrs.

Ya need to look at the price of North Sea Brent crude ($113/bbl) to get a truer picture.


I think it has more to do with the Fed printing than anything else. Central Bankers around the world are running the printing presses in a rush to devalue their currencies in hopes that it will stimulate growth. Japan has had 2 decades of deflation and no growth, the difference between Japan and the US is that Japan has a trade you all know, we do not. The pain at the pump we feel right now will be nothing compared to the pain that is coming. We have a trade deficit, so all the printing, borrowing and spending will result in hyper-inflation not deflation as the Japanese are dealing with. Those in the Fed actually have no idea how QE is going to work has never been done when the largest debtor nation in history has embarked on this endeavor (also the one that has been the world's reserve currency). Like it not, with the current monetary policy of the Fed, 4 dollar gas will be the new normal with spikes over 4.50 during peak driving seasons.

Good 2 B Me

20 Cents? They went up 41 cents at one of the gas stations in Sandusky.