Weak Dollar is a Pain in Gas Tanks
Gasoline prices have risen 16 cents a gallon in the past month and will go a bit higher before leveling off, oil and gas analysts say.
The national average price for a gallon of regular gasoline was $2.67 Monday vs. $2.69 a year ago, auto club AAA says.
The rise left San Franciscans paying $3.05 a gallon last week, the highest price of cities in the survey, the government's Energy Information Administration reported Monday.
Prices were up elsewhere: 16.4 cents to $2.82 a gallon in Chicago; 10.5 cents to $2.78 in Miami; 8.6 cents at $2.65 in New York; 12.1 cents to $2.60 in Boston; and up 13.6 cents to $2.55 in Denver. Houston had the cheapest gas at $2.49, 12.8 cents more than the week before.
Pump prices have followed a spurt in crude oil prices, which are up 10 percent the last two months.
Expectations of a global economic recovery have helped drive the increase. The weak dollar is another big factor. That's led investors to put cash in assets such as oil and gold, analysts say. Since oil is priced in dollars on global markets, a weaker dollar drives oil prices up.
"This is a bubble. We're near the top for oil," says Tom Kloza, chief oil analyst for the Oil Price Information Service. After breaking the $80-a-barrel mark last week for the first time this year, oil for December delivery fell Monday to $78.68 a barrel as the U.S. dollar strengthened.
Gas prices, meanwhile, may rise a few more cents to catch up, Kloza says.
A 10-cents-a-gallon gain for the rest of the year wouldn't be surprising, says Phil Flynn, energy analyst at research and trading firm PFGBest. He says the weakness in the dollar has driven the price of oil far beyond what supply and demand would normally bear.
Nationwide, gas supplies are currently about 4 percent above average, says Jim Ritterbusch, president of oil trading adviser firm Ritterbusch and Associates. Meanwhile, U.S. crude oil supplies, as of the week that ended Oct. 16, were 10 percent higher than a year ago, says Peter Beutel of research firm Cameron Hanover.
Still, any increase in gas prices hurts consumers, many of whom have suffered layoffs, furloughs and pay freezes.
"Higher gas prices just heighten the pain on consumers and gives them another reason to pull back on spending," says Ryan Sweet, economist at Moody's Economy.com.