Monday, March 4, 2013

All Quiet on the Gasoline Front (For the time being)

MaketWatch reports that the recent climb im gasoline prices is likely over:
Consumers are continuing to pay high prices at the pump for gasoline, even as oil prices are falling.

“Traditionally, the two are reasonably well related,”  said Andrew Wilkinson, strategist at Miller Tabak & Co., in a note Monday. “But the relationship has morphed over the years as refineries go offline and as the price of Brent crude, from which gasoline is refined, remains historically high.”

April crude oil fell for a third-straight session Monday, down 56 cents at $90.12 a barrel on the New York Mercantile Exchange, the lowest settlement level of the year. Brent crude for April delivery ended at $110.09 a barrel on ICE futures, down 31 cents.

Meanwhile, the average U.S. price for a gallon of regular gasoline stood at $3.746 Monday, down a bit from $3.751 Sunday, but above the $3.497 from a month ago, according to AAA’s Daily Fuel Gauge Report.

Consumers are likely to feel some relief in the coming weeks, said Wilkinson. “The cycle for unleaded gas prices appears to be playing out in a smooth fashion that will likely keep us range bound between $3.25 to $3.95 per gallon.”

Tom Kloza, chief oil analyst at the Oil Price Information Service, believes that the news this week will “involve pump price cuts for gasoline — and in some cases they may be quite substantial.”

Retail prices will drop, he said, with the largest drops likely to be seen on the West Coast. “California is now on summer gas [specifications], and is in the latter ‘innings’ of refinery maintenance,” he said.

But it’s still too early to say that the recent climb above $3.78 a gallon is the likely peak for 2013, said Kloza.

It should be noted that these analysts are taking a short-term view based on the technical supplies at the current time. But there is one other factor:

It's just not clear how in the medium term increased supplies will play out against Bernanke money printing. They are two forces acting in different directions on the price of oil and gasoline. If Bernanke keeps printing at the current pace, price inflation will eventually overcome downward pressure from increasing supply. It's all quiet, now, but Bernanke is in a very loud helicopter.

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