Price of gas is rising because it always rises this time or year

Posted in Around The Nation, Around The State, Energy, The Economy, Uncategorized at 10:56 am by wcnews

Via the AAS, Local prices up 8% in 2 weeks.

The increase tracks what’s happening across the country, in part because of rising oil prices, the switch to summer-blend gasoline and stations raising prices before the Memorial Day weekend, AAA spokesman Dan Ronan said.

The only reason gas prices are rising is because gas prices always go up in the summer. From the Dallas Fed’s Quarterly Energy Update we can see that the only reason the price of oil is going up is because there’s an “expected rebound in demand”.

Looking at vintage EIA forecasts, we can see that petroleum consumption estimates for 2009 have fallen drastically since mid-2008 (Chart 5). As recently as September, demand forecasts incorporated only minimal effects from the economic downturn. Demand is now expected to bottom out in June at just over 83 million barrels per day, before rising through the end of 2010.

The expected rebound in demand is relatively strong, though average consumption in 2009 is projected to drop to 84.1 million barrels per day—3.3 million barrels lower than was expected in September of 2008, and 1.3 million barrels below the 2008 average.

In other words the price of oil is going up, because oil speculators are driving it up, because they believe demand may rise, even though it isn’t rising. Just another benefit of the free market.

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