Is America’s consumption of gasoline critical to the price of crude? The issue will be tested this 4th of July. If US drivers plan to stay off the roads with gas prices pushing $2.70, the cut in demand might have some effect on petrol prices which have moved up from under $2 earlier this year.
The debate about whether demand or speculation has push up crude has continued and grown more violent as prices have crossed the $70 barrier.
Some analysts have argued that when oil prices where low late last year and early in 2009, large oil producing companies and nations cut back production and exploration. But, as OPEC cut supply, oil prices rose instead of falling. This has caused a number of politicians to question whether the normal forces of supply and demand are moving crude or whether speculators are trading the price of oil higher in the anticipation that the end of the recession will cause a boom in the need for oil-based products in the world’s largest nations.
According to the AAA, “A key factor in the projected decline in automobile travelers is a small spike in gasoline prices.” One weekend may not be test enough, but Labor Day is only two months off and, following that, heating oil requirements for the fall and winter will start to be an issue.
If American consumption of gas and oil stays low for the rest of the year, price increase will come under more suspicion.
Douglas A. McIntyre
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