Gasoline spikes above forecast for summer high

June 8, 2009


While the summer driving season has been underway for only two weeks, gasoline prices have already blown expert forecasts for highs for the summer.

Average prices at the pump on Monday were $2.62 a gallon, according to AAA, up 16 percent from just a month ago, and over the $2.50 a gallon high that AAA had forecast for the entire summer. Last week, AAA spokesman Geoff Sundstrom said the group revised its forecast for the summer high to $2.75 a gallon.

Although prices are much lower than the $4 a gallon national average a year ago, experts say the prices will hurt American consumers already hard hit by the recession.

How are higher U.S. gasoline prices affecting you? Are you cutting back on other expenses in order to keep your car fueled up? Are you considering cutting back on driving? Are you worried about prices moving a lot higher?


When gasoline prices went up dramatically in 2008 the U.S. reduced consumption. The result (along with the global economy downturn), gas prices went down. The supply/demand curve for gasoline is right at the watershed…if demand drops, so will prices…the United States should lead the way in finding ways to consume less.


High demand and low supply means high prices. Todays price rises are mainly caused by speculators gambling on taking enough crude oil out of the market to cause a shortage.

I doubt if this strategy is sustainable as at the moment we speak of low demand and a total saturation of the market, you only have to take a look at the port of Rotterdam where due to oversupply crude oil storage is filled to capacity. Nice try though.


What a giggle. In Edmonton Alberta where we refine this stuff, gasoline is 94.5 cents per litre, $Canadian, today, average price. Our Imperial gallon is 20% more than a US gallon. Our price works out to $3.57 Can for a US gallon.(3.7854 litres). Adjust for the Can/US exchange rate and we pay a bunch moreThan you. And we ship it to the NW USA where it is retailed for less than we pay, refining it in this Province.

Posted by Farm Kid | Report as abusive

For those not aware, Alberta Canada has the second lagest proven and recoverable oil reserves on this planet we call Earth, second only to Saudi Arabia.

Posted by Farm Kid | Report as abusive

We are being gouged. Do the math. Last year oil was $144/Barrel and gas was $4.55/gal. This year oil is $70/Barrel and gas is $2.95. Using a simple algebraic formula 4.55/144=x/70 solving it shows we should be paying $2.21/gal based on last years costs.

Posted by Dan Mitchell | Report as abusive

Folks think that because crude oil storage is maxed out and OPEC has cut production by a few million barrels a day that high oil prices are all the fault of the speculators.Before that folks used to think that it was Exxon’s fault.The world consumed 30 billion barrels of oil in 2006 and sometime between 2006 and 2007,world oil production peaked.Oil production will probably never reach those peak levels again and each subsequent production peak will be a little lower than the previous peak.There is not enough oil left on the planet to cover the needs of 6.5 billion people to live an affluent life and maybe not even an adequate life style.

Posted by bilbo b | Report as abusive

Farm Kid: You are right you pay more in the Province and Country were I am a citizen but you also have health care completely subsidized. Try paying several hundred dollars in premiums and then add in co-pays upwards of $2-5000/year. So yes you pay more at the pump but it works out as less in the end – just a hunch.

Posted by Transplanted CDN | Report as abusive

Unfortunately, gas/fuel pricing has morphed from raw material costs, supply and demand to more with ‘what the market will bear’. That’s why prices in the upscale burbs of LA will always be more than some backwater town in rural Alabama.

Once Big Oil gets the consumer to accept a certain price at a certain time of the year, it doesn’t matter that Big Oils’s costs might well be significantly lower… the perceived affluence of the community is what dictates the price a consumer will have to pay in a particular market.

Even if the entire county/state went electric/hybrid and 90% ditched their guzzlers (not likely anytime soon) and bought Priuse’s; and the price of Oil went to 35$… If the community was affluent, does anyone really believe that the retail price of gas would only reflect the realities of supply and demand?

Only in your dreams…

Posted by Richard | Report as abusive

This is a snippet from article in Yahoo Finance. What I don’t understand, is if someone that has the title “Retail Pricing Director at the Oil Price Information Service” can’t figure out why prices are spiking, just who does know?? And more importantly, who is in control???

…Fred Rozell, retail pricing director at the Oil Price Information Service, said part of the run-up can be linked to signs of a stabilizing economy, but there’s no ignoring that fuel demand remains weak. Demand fell again at the end of May, according to the Energy Department. Also, refiners have begun at least somewhat to crank up production in recent weeks after months of scaling back.

“We probably had a mini-bubble here and, like all bubbles, they tend to go beyond what they should,” Rozell said. “That doesn’t mean prices won’t start marching up again this week, but a lot of people are scratching their heads about why we’ve seen prices run up as much as they have.”

Posted by Tim McLarty | Report as abusive

I agree that we are price gouged. We need to depend less on foreign oil and look more towards ways to become energy independent.

Posted by Trisha | Report as abusive

No one has answered the questions. Are gas prices affecting your driving. Yes, I am not taking a vacation this year. Yes, I cut back on food every week to have gas and yes I expect the price to be $3.00 by July 4th.

Posted by Victoria | Report as abusive

And I read today that gas prices have gone up for 45 straight days…WHY? I understand most of the dynamics of oil prices — refinery output, capacity, futures trading, supply/demand, etc. But could SOMEONE please explain in a rational manner just how prices at the pump are set? And more importantly, how is the price justified?

Posted by Tim McLarty | Report as abusive

Prices at the pump come from:
1.) Price per barrel (refineries buy at this price regardless of whether their company produced the oil)

2.) Refining, distribution and retailings costs less than $0.50 / gal

3.) Taxes – This is about $0.50 / gal

I wrote more about this at the above website, and include links to both industry and government information on both refining and retail costs.


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