Gasoline prices across the nation have remained relatively stable as the turmoil in Iraq continues to shake global petroleum markets, but the chances for a gradual decline in prices at the pump are receding, observers suggest.
GasBuddy.com estimated gasoline prices increased by three cents last week to an average of $3.683. However, the price of low-sulfur diesel oil has risen by roughly 10 cents during the past two weeks, reaching nearly $3 per gallon in the wholesale markets around New York Harbor.
Prices have not followed the established seasonal trajectory of dropping in the weeks after the Memorial Day holiday. Gasoline prices will typically peak in spring and retreat in June, and that’s not happening this year. In fact, the $3.67 average national price for a gallon of regular gasoline on June 18 was the highest it has been on that day since 2008 and is close to this year’s peak of $3.70, which occurred on April 28.
The higher gasoline prices are likely to remain this summer, according to the AAA.
“Despite hopes for a less expensive summer, it looks like Americans are stuck paying above-average gas prices,” said Michael Green, AAA spokesman. In May, AAA predicted the national average might decline 10-15 cents per gallon this month, but, given the instability in Iraq, it no longer expects that.
Before Islamic Sunni militants took control of Mosul, a city in northern Iraq, U.S. gas prices had declined 32 out of 44 days. Since then, they’ve steadily risen along with global oil prices, which account for at least two-thirds the cost of gasoline, according to AAA.
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Unrest in Iraq, however, isn’t the only factor boosting gasoline prices. The expansion of the demand for automobiles, in particular in the U.S. and China, has helped push up the price of crude oil right across the globe.
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Higher prices have created the incentives – and financed the new technology and techniques – needed for U.S. energy companies to increase oil production in U.S. by roughly 50% since 2008. The U.S. produced 5 million barrels of oil in 2008 and 7.4 million barrels in 2013 and the figure is expected to increase again this year.
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Meanwhile, automakers are waiting to see if the modest increase in gas prices will shift buying patterns of American consumers, which have been leaning towards trucks and utility vehicles for the past year.