March 20, 2023

Sudden Spike in Gas Prices, but Increases May Be Short-Lived

And according to the AAA daily gauge report, the average price of a gallon of regular gasoline is 17 cents more today than just a year ago, at a time when Americans appear to be driving substantially more than last summer.

In the last week, the price rose approximately 7 cents, reaching an average $3.55 on Friday for a gallon of regular grade, the report said. Prices range widely around the country. In South Carolina, for instance, a gallon of regular averages $3.21; in California drivers pay $3.99.

“We’re going to get a little sticker shock at the pump,” said Tom Kloza, chief oil analyst at, a Web site that monitors gasoline prices. “We’ve moved up on wholesale prices anywhere from 35 to 60 cents a gallon since June 28. This summer we are looking at average prices of somewhere between $3.45 and $3.75, and unfortunately I think we will approach the high end of that range pretty shortly.”

The recent price increases can be attributed mainly to higher global crude prices that have been creeping up because of the unrest in Egypt, brief export failures in Libya and Iraq and disruptions of Nigeria’s oil pipelines. Egypt is not a major oil producer, but instability there raises fears of a possible blockage of the Suez Canal, a major thoroughfare for oil exports and spreading unrest in the region.

West Texas Intermediate, the main American benchmark, has been rising for more than a week, partly because higher demand among summer vacationers has caused a sudden large drop in American inventories. Many experts say they believe that the American benchmark price, which has been depressed relative to global benchmarks in recent years, could remain somewhat higher for a while because new pipelines and railroad lines are gradually relieving bottlenecks for oil produced and stored in the Midwest.

In storage and delivery centers like Cushing, Okla., for example, excess inventories of landlocked oil that could not be easily transported made the oil cheap. But now that supplies are moving around the country more regularly, wholesale and retail prices are rising.

Stockpiles in Cushing fell by 2.7 million barrels last week alone, reaching the lowest levels of the year.

In recent years, a weaker economy and more fuel-efficient vehicles combined to lower American gas consumption, before this summer’s blip of vacation driving bucked the trend. And few oil experts expect a long-term increase in oil and gasoline prices. The rapid growth in United States oil production, coupled with sluggish demand in Europe and slowing growth in China and much of the developing world, is expected to restrain prices. Some experts predict a decline in oil prices over the next year.

“You will see oil prices hover somewhere in the $70 to $100 range,” Harbir S. Chhina, an executive vice president for Cenovus Energy, a major Canadian oil company, predicted for the United States oil benchmark in an interview last month.

The United States benchmark has broken out of that band for the first this time year in recent days to just over $105, representing about a $20 rise from last July. Crude prices, in the United States and abroad, rose approximately 1 percent on Friday.

Global oil production remains robust and some recent supply problems are easing. Two Libyan oil export terminals that were shut down in recent weeks by militias and disgruntled employees have resumed operations. The Kirkuk-Ceyhan pipeline, a major outlet of oil from Iraq’s northern oil fields, is returning to operations this week after being suspended since June 21 because of a leak and an interruption of repair work after an ambush on a crew of technicians.

Oil experts warn, however, that there is no telling when the next political crisis will come in the Middle East or North Africa.

“Oil price predictions used to be about oil consumption and markets, but now it’s about where the next riot will break out,” said Stale Tungesvik, a senior executive at Statoil, the Norwegian oil giant. “It’s so much more politically based, and that makes it a mystery to everyone.”

This article has been revised to reflect the following correction:

Correction: July 12, 2013

An earlier version of this article misspelled the surname of a senior executive at Statoil. He is Stale Tungesvik, not Tugesvik. It also misspelled the name of a Canadian oil company. It is Cenovus Energy, not Cenovis Energy.

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India Ink: Reserve Bank Holds Interest Rates Steady to Fight Inflation

A policeman walks past the logo of the Reserve Bank of India outside its head office in Mumbai, Maharashtra in this Nov. 2, 2010 file photo.Danish Siddiqui/ReutersA policeman walks past the logo of the Reserve Bank of India outside its head office in Mumbai, Maharashtra in this Nov. 2, 2010 file photo.

In spite of growing calls for it to support India’s slowing economy, the Reserve Bank of India said on Monday it would not cut interest rates or lower banking reserve requirements because inflation was still too high for it to act.

Rather, the central bank called on the government to reduce its fiscal deficit and do more to ease supply bottlenecks that restrict farmers, factories and others from producing enough to meet the rising demand for food, manufactured goods and other products.

Many analysts and bankers had hoped the central bank would cut its benchmark interest rate, at which it lends money to banks, by 0.25 of a percentage point and lower its cash reserve ratio by as much as 1 percentage point, which would free banks to lend more money to businesses and consumers.

In April, the central bank cut the benchmark rate by 0.50 of a percentage point, which was more than had been expected, to 8 percent. It has also lowered the reserve ratio several times in recent months to 4.75 percent from a high of 6 percent.

In explaining its decision, the central bank said cutting interest rates further would have done little to support investment and growth, and would have pushed prices even higher instead. In recent months, India’s wholesale price index has been rising by more than 7 percent from a year earlier, even as the economy slowed to a 5.3 percent year-on-year growth rate in the first three months of the year, down from 9.2 percent in the comparable period a year earlier.

“Our assessment of the current growth-inflation dynamic is that there are several factors responsible for the slowdown in activity, particularly in investment, with the role of interest rates being relatively small,” the Reserve Bank of India said in a statement. “Consequently, further reduction in the policy interest rate at this juncture, rather than supporting growth, could exacerbate inflationary pressures.”

The statement appeared to surprise investors and analysts, many of whom have grown increasingly pessimistic about the Indian economy and expected that the central bank would have felt compelled to cut rates. The benchmark Nifty 50 stock index was down 1.5 percent at the end of the day.

But the central bank stuck to a strong anti-inflationary stand and, as it has done several times in recent months, blamed the Indian government for not doing enough to help the economy. On Monday, the central bank said the government’s high fiscal deficit, particularly its spending on fuel subsidies, was “crowding out public investment at a time when reviving investment, both public and private, is a critical imperative.”

“A lot depends on the government taking credible, concrete steps to revive investments in the economy,” said Shubhada Rao, the chief economist at Yes Bank in Mumbai. “Interest rates will play a limited role in spurring investments.”

India’s government is in the midst of a major transition in economic policy making. The finance minister, Pranab Mukherjee, is running for president, a largely ceremonial post that has some important constitutional powers. It is unclear who would succeed him as finance minister, but many analysts and Indian journalists have speculated that Prime Minister Manmohan Singh, a former finance minister, would take on that position as well, at least for a few months.

Still, regardless of who becomes finance minister, analysts say Mr. Singh’s government will have difficulty following the central bank’s prescription of reducing subsidies, the fiscal deficit and supply constraints, changes this government has struggled to make since being re-elected three years ago.

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