Rising Pump Prices
Chart of the Week for August 29-September 4, 2003
An unexpected combination of recent events has led gasoline prices markedly higher over the past few weeks. So far in August the national average price of a gallon of gasoline has risen more than 16%, from $1.55 per gallon to a record $1.80 per gallon. Some Western states have experienced prices in excess of $2.00 per gallon. Many are left wondering why gasoline prices are so out of sync with oil prices. Early in the year when uncertainty over Iraq drove crude oil prices higher there was a direct correlation with rising gas prices. Correspondingly, once the major fighting ended in Iraq and crude oil prices began falling, so too did gasoline prices.
Today’s divergence between gas and oil prices is largely due to lower-than-expected oil inventories versus higher-than-expected demand. The pipeline troubles experienced in Arizona and the recent history-making blackout have only exacerbated the supply problem. The summer driving season is officially over on Labor Day weekend, so demand is expected to subside into September. Unfortunately, it is likely that short term gas prices have not yet peaked.
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