Gasoline prices: Have we reached the top yet, or just a false summit?
The danger of consumer sticker shock faded at the pumps this week as gasoline prices appeared to hit a plateau. But analysts are divided over where they go from here.
The danger of consumer sticker shock faded at the pumps this week as gasoline prices appeared to hit a plateau. But analysts are divided over where they go from here.
It looks as if it鈥檚 safe 鈥� at least this week 鈥� to pull out of the driveway and head to the gas station without worrying that the price at the pumps will be a lot higher than the last time.
Over the past week, the retail price of gasoline has barely budged.
Yes, it鈥檚 still relatively high at $3.92 a gallon, according to AAA鈥檚 Daily Fuel Gauge Report. But, after rising all through February and March, the daily increases in gasoline prices have ended 鈥� for now.
鈥淭he price seems to have plateaued,鈥� says Bob Darbelnet, president and CEO of AAA, the national motorists club. 鈥淲e think it is pretty close to the peak.鈥�
There could be important consequences for the economy if oil prices were to stay close to their current levels or decline. It could take pressure off businesses faced with daily fuel surcharges. And consumer attitudes could start to improve, which could help the economy.
鈥淪imply put, the price hasn鈥檛 reached a point where it is so oppressive it is hitting confidence,鈥� says Joel Naroff of Naroff Economic Advisors in Holland, Pa. 鈥淚f prices stabilize, people will say, 鈥業鈥檝e seen this happen before, prices go up, they go down and I won鈥檛 worry about it.鈥� 鈥�
If prices are indeed getting ready to fall, Mr. Naroff says the effect could also extend to the political arena. 鈥淚f prices fall 50 cents a gallon, gasoline prices are not a major issue,鈥� he says. 鈥淚f Romney says he鈥檒l get gasoline down to $2 a gallon, not a lot of people will believe him.鈥�
According to AAA, the three cities with the highest average gasoline prices as of Tuesday are Chicago at $4.57 a gallon, San Francisco at $4.35, and Santa Barbara, Calif., at $4.33. The three lowest are Caspar, Wyo., at $3.41 a gallon, Cheyenne, Wyo., at $3.55, and Pocatello, Idaho at $3.62.
Of course with gasoline prices, the Middle East is the 鈥渨ild card,鈥� notes Mr. Darbelnet. 鈥淚f there is a major event like a disruption of supply from the Middle East, the odds are prices will rise.鈥�
That鈥檚 why the energy markets will be watching the multilateral negotiations this weekend between Iran, the US, China, Russia, France, and Germany over the Iranian nuclear program.
The rhetoric leading up to the meetings in Istanbul are worrisome, says John Kilduff, a principal at Again Capital, an energy consulting firm in New York.
鈥淭his weekend鈥檚 meetings look as if they are set up for failure,鈥� says Mr. Kilduff. 鈥淚f they fail, oil prices will jump early next week.鈥�
However, he adds, any 鈥渄efrosting鈥� of the tensions could also be beneficial with oil prices falling 鈥渁ppreciably lower.鈥�
On Tuesday, the price of crude oil on the New York Mercantile Exchange fell to $101.23 a barrel, down $1.23.
Despite the lower crude prices 鈥� down about $8 to $9 a barrel in the last month, there are still energy experts who think gasoline prices may still rise. On Tuesday, the Energy Information Administration (EIA) predicted the average price of gasoline on a national basis would peak at $4.01 gallon.
鈥淲ith all the volatility in the oil and gas prices, we have learned to hold our breath on any price movements,鈥� says Tancred Lidderdale, an energy analyst for EIA in Washington.
Mr. Lidderdale points out that oil production is still curtailed in Yemen, South Sudan and Syria. By the end of this month, the US is trying to get nations to curtail their purchase of Iranian oil. Saudi Arabia has said it will pump more oil to make up for any potential loss of oil from Iran.
In fact, some analysts are convinced the current plateau in oil prices is simply a stopping point before they go higher. Sandar Cohan, a principal at Energy Security Analysis Inc. in Wakefield, Mass., calls it 鈥渢he calm before the storm.鈥�
Mr. Cohan says there is a 鈥渢ug of war鈥� taking place in the gasoline market. On one side are those who think prices will rise because of tensions in the Middle East and refineries closing down. On the other side are those who say gasoline demand is weak and the economy is shaky.
Cohan is convinced gasoline prices will crest over $4 a gallon and maybe reach $4.50 a gallon by mid-summer. 鈥淭here are still a lot of things that can upset the applecart and turn prices the other direction,鈥� he warns.