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Gasoline Price Rises in Early 2006

Posted on: Monday, 9 January 2006, 18:00 CST

By Russell Ray, Tulsa World, Okla.

Jan. 7--Gasoline prices in most markets have moved significantly higher in the first week of 2006.

The price of regular-grade gasoline jumped 10 cents this week at most Tulsa locations to $2.19 a gallon, the dominant retail price as of Friday evening.

Industry observers attribute the increase to higher prices for crude oil, the feedstock for nearly all transportation fuels, including gasoline.

Since Christmas, the price of crude has risen 10.4 percent to $64.21 a barrel on the New York Mercantile Exchange.

But Mark Madeja, a spokesman for AAA-Oklahoma, questions the spike in oil.

"I feel very much that the market has been taken advantage of," he said.

The explanations for higher oil prices vary -- from the war in Iraq to production snags caused by last year's hurricanes to rising demand and thin supplies. Analysts also have pointed to a disruption in natural gas shipments from Russia to Europe as a reason for the jump in crude prices.

But the explanations don't jibe, Madeja said.

"These are all so insignificant," he said, adding there is "no real rational reason at all" for higher oil prices.

The demand for heating oil is down due to warmer weather, and U.S. oil supplies are ample. Oil inventories are 12 percent above the five-year average for this time of year, the Department of Energy said earlier this week.

Other analysts say the quick rise in oil prices has little to do with changes in supply and demand. Instead, they point to a surge in the number of crude oil contracts opened by New York energy traders, a sign that hedge funds and other speculators continue to pour money into the market.

"There's an element of investment money where they could just as easily be trading GM, euros or oil," said Peter Beutel, an oil-market consultant for Connecticut-based Cameron Hanover Inc. "Those are the people that have come back into the market early in 2006."

Nationwide, gasoline pump prices are averaging $2.26 a gallon, up from $2.13 a month ago, according to a AAA survey.

In Oklahoma, motorists are paying, on average, $2.15 for a gallon of regular unleaded. That's 18 cents higher than this time last month. A year ago, pump prices in Oklahoma were averaging $1.61 a gallon, according to AAA.

A month ago, Tulsa motorists were paying, on average, $1.91 a gallon for regular, AAA said. Pump prices in Oklahoma City are averaging $2.13 a gallon, up from $1.94 a month ago.

Gasoline prices in Montana, Idaho, Utah and Wyoming are lower than in Oklahoma, Madeja said.

Some analysts say declining natural gas prices should pull the cost of crude back down.

This week, natural gas fell sharply amid a surprising increase in U.S. gas supplies and forecasts for warmer weather.

Natural gas closed Friday at $9.63 per 1,000 cubic feet, down from a Dec. 13 peak of $15.78.

The Associated Press contributed to this report.

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Copyright (c) 2006, Tulsa World, Okla.

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Source: Tulsa World

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