Gas demand still high as oil climbs

  • Follow Business

NEW YORK --- Oil prices made up for a slump after the Japanese earthquake and are now trading at the highest levels since September 2008.

Prices climbed early Wednesday after an Energy Department report showed gasoline consumption continues to grow despite sharp increases at the pump.

Traders also kept a wary eye on pro-democracy protests and outright rebellions in North Africa and the Middle East. The region supplies 27 percent of the world's oil. Prices jumped after a bomb exploded at a bus stop in Jerusalem, killing one and hurting 20 others.

Benchmark West Texas Intermediate crude for May delivery added 78 cents to settle at $105.75 per barrel on the New York Mercantile Exchange. Oil hasn't settled that high since Sept. 26, 2008.

The Energy Information Administration's report suggested motorists are handling higher fuel costs without cutting back. At a national average of $3.548 a gallon, pump prices are the highest ever for this time of year and economists expect consumers to start to cut spending.

If they use less gas, it will be a key tipping point for the economic recovery. Many Americans are reluctant to trim driving, so a drop in gas consumption means "they're doing a lot of other things less," said Kenneth Medlock, an energy expert at Rice University. "It means they're going out to dinner less, going to the mall fewer times, going to the movies fewer times."

So far, the U.S., which consumes more petroleum than any other country, doesn't seem to have balked at higher gas prices.

The government report said motorists consumed an average of 9.1 million barrels per day of gasoline, up 1.2 percent from the same period last year. It said demand has increased each of the past five weeks when compared with 2010. The report also said gasoline supplies dropped last week by 5.3 million barrels, more than twice as much as expected.

Oil prices have jumped about 24 percent since the middle of February, when fighting broke out in Libya. The clashes have shut down most of its oil production, which supplied nearly 2 percent of world demand. Experts say Libyan exports will stay offline for months.

The surge in oil prices slowed with the crisis in Japan. The earthquake and tsunami hammered the world's third-largest economy, and Japan's oil consumption was expected to shrink while it picks up the pieces. That lasted for only a week, however, and oil prices rose again as damaged refineries went back online. Gasoline has followed oil higher this year, jumping 37.7 cents per gallon in the past month, according to AAA, Wright Express and Oil Price Information Service.

"It's very possible we'll see a national average of $4 per gallon this year," PFGBest analyst Phil Flynn said. If fighting in the Mideast escalates to the point where exports from other countries are affected, Flynn said oil prices could spike to $200 per barrel, pushing gasoline to $5 a gallon.

loading...
Top headlines

Fort Gordon transitions to fuel-efficient vehicles

Fort Gordon has exceeded a 2009 executive order that requires a 2 percent annual reduction in greenhouse gas emissions and a 30 percent decrease in petroleum-based vehicles in federal fleets by ...
Search Augusta jobs