Gasoline prices appear to have peaked more than a month earlier than usual this year at less than $4 a gallon, reflecting reduced tensions with Iran and declining demand for fuel in the U.S. and China, oil analysts say.
Average pump prices fell 4 cents last week to $3.90 a gallon after having peaked at $3.94 on April 6, the AAA reported. That is about a dime shy of the high point reached last year around the usual seasonal peak on Memorial Day, and 21 cents below the all-time high of $4.11, set in 2008.
Gas prices typically rise in the run-up to the peak summer driving season, which starts May 31, and then fall from late summer through the winter when consumers use less gas and do not have to buy the more expensive super-refined fuels needed to fight air pollution during the summer.
The early plateauing and decline of gas prices this month reflects diverse developments from progress in talks with Iran over its nuclear program to a decline in speculation in the gas futures market, and increased hopes that key refineries in the Northeast will not be shut down as anticipated this summer.
The White House came out gunning at the speculation factor in a show of force Tuesday as an array of regulators looked to hunt down illegal manipulation of the oil and gas markets.
t was the Iran standoff that in January launched gas prices on an early start to their usual spring run-up. Speculation that mounting demand in the U.S. and China would put pressure on world supplies depleted by a Western boycott of Iranian oil added to the price spike.
President Obama on Tuesday asked Congress to strengthen rules and enforcement against speculation in the oil and gas futures market, where investors make bets on the level of prices from one month to six months in the future.
Intense, worldwide speculation played a role in driving oil prices to all-time highs near $150 a barrel in 2008, according to several studies, and has re-emerged in commodities markets in the past year.
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I would argue that the reason prices are becoming stable is not so much an increase in supply (or at least, a non-disruption in supply), or a reduction in demand (though demand is falling in many places in the world where the economy is in serious decline, such as Europe). BUT that the dollar is stabilizing in value since no matter how unwise the monetary polices of Obama and Bernanke are, the European Union is even dumber. Since they are printing money faster than we are, the dollar is stable or rising compared to the Euro, which means that the price of oil expressed in dollars appears to be stable.