Gas Prices Going Higher

Gas Prices Going Higher. I’m Greg Martin with today’s Line On Agriculture.

Gasoline prices have been doing the slow creep upwards over the last several months even though demand has been down and reserves are up. Dave Carlson with AAA says there are a number of factors why.

CARLSON: I wouldn’t call it a market in disarray but it is a market that’s in some transition right now. We’ve actually seen oil prices come down to about $85. Just 10 days – 2 weeks ago we were looking at the Egyptian crisis with the threat of pushing oil prices higher, they did so for a day or so – reached $92 but oil has actually been dropping since then – been operating in the last day or so in the $84-$85 dollar range.

He says that’s all brought on by what is going on in China.

CARLSON: They’re trying to deal with rampant inflation in that country so they’re trying to come to grips with their lending and deposit rates there. That has strengthened the dollar. A strengthened dollar actually leads to a lower investment in commodities like oil and gas. SO what we’re seeing is lower prices for oil at a time when gasoline prices are the highest ever for this time of year.

As he takes a look forward in March through May they expect that gasoline prices are probably going to surge a bit. Reserves do look good though.

CARLSON: Reserves are in good shape. Unfortunately gasoline reserves doesn’t last for any length of time and the fact is that as we’re moving into the summer months the refineries have to get rid of that winter-grade gasoline which is a bit more volatile. When they do so they cut their inventories, that puts pressure on local pump prices because the inventories are low and it’s a seasonal situation we see every year.

One new factor that has not had a chance to make much impact has been the introduction of mass-market electric vehicles.

CARLSON: Maybe we’re a couple of years away from the wholesale increase which is supposed to reach I think a half million vehicles entering the marketplace by about the year 2015 so in a couple of years we’re going to see more and more of the electric vehicles in the marketplace but right now the oil and gasoline markets are really run by the huge expected growth in Asia for petroleum product and increasing demand here in the U.S. as we come out of some economic doldrums.

Which of course does not bode well for the price we all pay at the pump.

That’s today’s Line On Agriculture. I’m Greg Martin on the Ag Information Network.