By Brian L. Milne, Refined Fuels Editor for Telvent DTN
After declining since late June, retail gasoline prices will turn higher in most of the country’s metropolitan markets, pushed up by climbing wholesale costs.
The rise at the pump will vary nationally, with markets in the upper Midwest likely to see flat to small increases as sharp declines in wholesale costs realized earlier in July continue to work through the supply chain to retail.
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Crude oil and gasoline prices remain volatile in wholesale markets, with costs climbing in mid July after steep losses earlier in the month. In what is referred to as a correction, in commodities when prices move sharply lower a reversal typically occurs as some in the market believe the selling was overdone and believe the lower values are a buying opportunity. The opposite is true as well.
There is more to the recent move higher in the wholesale gasoline market then just a correction however. Once again, macroeconomic influences are adjusting the costs for transportation fuel.
Key stock indices, such as the Dow Jones Industrial Average and S&P 500, have rallied off early July lows following better-than-expected quarterly earnings reported by some public companies, renewing optimism that the economy is improving. Economic growth drives demand for energy higher.
Another important broad-based indicator is the U.S. dollar, which is again weakening. Crude oil trades internationally in US dollars, so a weaker greenback pushes up the costs of crude oil. Crude oil is the primary cost component for gasoline, with 66 percent of the price per gallon of gasoline in May attributed directly to the value of crude oil.
About the Author
Brian L. Milne is the Refined Fuels Editor for Telvent DTN-a leading business-to-business provider of real-time commodity information services. Milne has been focused on the energy industry for nearly 14 years as an analyst, journalist and editor. He can be reached at [email protected].