AAA Fuel Gauge Report Overview
By Andrew Delmege
Manager, Regulatory Affairs
Monday, November 16, 2009
A potent mix of dollar weakness, growing international economic activity and better than expected retail sales data helped oil prices move higher today. Oil ended the day up nearly $2.60 to close at $78.96 on the New York Mercantile Exchange.
On the international front, news the gross domestic product of Japan, the world’s third largest oil consuming nation, grew 4.8 percent in the third quarter signaled to many the potential for returning international oil demand. In the US, an increase in retail sales of 1.4 percent in October fed optimism on the US economy.
With regards to the strength of the US dollar, Monday Federal Reserve Chairman Ben Bernanke suggested the Fed would eventually instill policies that would strengthen the US dollar in the long term. At the same time, Chairman Bernanke also suggested low interest rates – an ingredient that contributes to a weak dollar – will remain in place for some time to come. As such, it appears the US dollar will remain relatively weak for the foreseeable future.
An interesting snapshot of the broader US economy and specifically the mood of US motorists will come soon with the Thanksgiving holiday. The number of travelers who hit the road during the long holiday weekend will provide insight into how consumers feel about spending money on gasoline and other travel-related expenses. An increase in travel by car may suggest consumers are feeling better about the broader economic picture and that retail gasoline prices are at levels comfortable enough to not hinder their travel plans.
In November of 2008, retail gasoline prices were trending decidedly lower, away from the summer’s record highs amidst disintegrating fundamentals and spurred by the worst economic meltdown in decades. The national average retail gasoline price at this time in 2008 was $2.10 per gallon for self serve regular. Interestingly, beginning in November of last year retail prices were falling an average of 2 cents a day heading towards a low price in late December.
However, comparing the upcoming Thanksgiving holiday to last year’s in terms of retail gasoline prices is not exactly an “apples-to-apples” comparison. Today, the economic picture is perhaps best described as murky, with mixed signals on the direction oil and gasoline fundamentals emerging weekly. One component of market oil prices that is clear, however, is that prices are being propped up by US dollar weakness. All told, for the upcoming Thanksgiving holiday, consumers can likely expect a national average price at least 60 cents higher than last year’s price.
One interesting side note on current oil supply levels is attracting renewed attention in the media and the markets. The massive amount of oil currently being sequestered on large ocean going tankers is approaching ten year highs. According to some estimates, there may be as much as 143 million barrels of crude oil currently onboard ships floating in various waters around the world. To put the sheer magnitude of this supply in proper perspective, 143 million barrels of oil is enough to satiate US oil consumption for an entire week.
Retail prices nationwide are about 11 cents higher than at this time last
month. As of Monday, the national average retail price for a gallon of self
serve regular is $2.631 or about 3 cents cheaper than one week ago.
The above information is intended to provide perspective on fuel prices
to AAA club spokespersons in speaking to the news media or in preparing
news releases. If you have questions about any information contained in
this document, do not hesitate to contact Andrew Delmege at 202-942-2072.
For information on automotive fuel issues, including AAA's recommendations regarding fuel conservation, click here.