By Brian L. Milne, Refined Fuels Editor, Telvent DTN
The U.S. retail gasoline price average moved off a two-month low at $2.56 gallon reached midway through December, and is again climbing on higher crude costs in front of the Christmas holiday, driven by advances in the financial oil markets.
Crude costs were leaking lower in December on abundant supply and tepid demand and a stronger U.S. dollar. Cold weather, with a winter snowstorm pummeling the East Coast during the weekend in front of Christmas, has lent upside support for crude oil prices. Aside from that, there has been little change with the market’s bearish market fundamentals.
The U.S. dollar had strengthened to a three-month high as we marched into winter. It had fallen to a 16-month low in late November that had helped to rally crude prices, with the weaker greenback pressing the U.S. crude benchmark below $70 a barrel in mid December for the first time since early October.
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Crude is again above $70 barrel, nearing $75. The key catalyst for the gain was an Iranian incursion into disputed land with Iraq which triggered worries of increased hostilities by Tehran, which has been cracking down harshly on dissidents. Iran has also frustrated western powers over its nuclear ambitions, with the west concerned that Tehran is in pursuit of nuclear weapons.
On Dec. 18, a fragile Iraqi government said that roughly a dozen Iranian troops and technicians took control of an oil field inside its southern territory and raised the Iranian flag there. Iran has since pulled back from the first serious incident between the two neighbors since the U.S.-led invasion of 2003. Iran and Iraq, both members of the Organization of Petroleum Exporting Countries or OPEC, fought a bitter war from 1980 to 1988.
The higher crude prices pushed up wholesale gasoline costs a nickel a gallon or more in many major metropolitan markets, halting the slide in retail values from the 2009 high in the national average at $2.66 gallon reached Nov. 2.
Holiday Travel Surging
Travel during the Christmas-New Year holiday period is expected to be much higher than last year, with the Automobile Association of America projecting 87.7 million Americans will travel 50 miles or more away from home during the year-end holidays, up 3.8 percent from the 2008 holiday period. The anticipated increase in travel follows a 4.7 percent decline a year ago.
“More Americans traveling during the winter holidays is another sign consumers’ are continuing to grow more confident in their personal financial situations,” said Glen MacDonell, AAA’s director of Travel Services.
The number of travelers by automobile is expected to be 77.7 million, up 4.4 percent from the 2008 period. However, holiday auto travel in some states will decline from a year ago, including less travel in New Jersey, New York and Pennsylvania, with higher gasoline prices in November seen as the reason.
“A majority of motorists say they watch gas prices like a hawk,” said AAA Mid-Atlantic spokesman David Weinstein. “In November, when prices typically fall, prices did not fall and were in fact much higher than a year ago. It played a part in the planning process.”
About the Author
Brian L. Milne is the Refined Fuels Editor for Telvent DTN-a leading bU.S.iness-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].