Why gas prices climbed 13 cents in a week, and look set to keep going

Demand has been dropping, but supply problems are causing gas prices to rise again. A refinery fire in California and a broken oil pipeline in the Midwest are partly to blame.

By Ron Scherer,?Staff writer / August 8, 2012

Michael Bieberitz of Wauwatosa, Wis., puts gas in his car on Aug. 3, 2012, at a Milwaukee station.

Roger Schneider/AP

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As summer heads into its last month, the price of a gallon of gasoline keeps rising and rising.

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In the past week, nationally, the average price at the pump is up 13 cents, to $3.65 a gallon. That's 27 cents a gallon higher than it was a month ago. And by tomorrow, the price could be higher than it was a year ago ? the first time that has happened since the end of April. In some states, a return to $4 a gallon is becoming a possibility.

What?s happening to cause the price to rise so quickly?

Some of the rise is the result of bad breaks, say some energy analysts. A big refinery fire this week in California and a pipeline leak in the upper Midwest have hit at just the wrong time. In addition, the price of crude oil has been rising as the markets have become increasingly convinced that Europe will solve its debt woes. If that happens, the theory goes, the European economy won?t worsen, and demand for oil may rise.

Rising prices at the pump may have some political ramifications, as Americans grouse over their rising fuel bills. Earlier this year, the oil industry and congressional Republicans criticized President Obama for rejecting the Keystone XL natural-gas pipeline from Canada that would go through environmentally sensitive areas en route to the Gulf of Mexico.

?The problem is that the price of gasoline is a very visible, tangible piece of evidence to the problems of the economy. It is something people experience in a direct way, as opposed to some of the economic indicators which are more abstract,? says Lee Miringoff, director of the Marist College Poll in Poughkeepsie, N.Y. ?It comes as unwelcome news to Team Obama.?

The rising price also comes as many Americans are starting to pack their cars for an August vacation. ?We are in the last month of the driving season,? says Avery Ash, manager of regulatory affairs at AAA in Washington. ?After Labor Day, it?s our expectation that gasoline prices will come back down as we have lesser demand and there is the switchover from summer blends of gasoline to winter blends, which are easier to produce.?

Last year, the price of gasoline fell by 40 cents a gallon between Labor Day and Christmas, he notes.

The August price increase is not unprecedented. However, data from the Energy Information Administration show that demand is down about 4 percent over the past four weeks.

Source: http://rss.csmonitor.com/~r/feeds/csm/~3/Syn1UFDQ_cI/Why-gas-prices-climbed-13-cents-in-a-week-and-look-set-to-keep-going

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