Light sweet crude prices remained high today settling in at $49.15 in New York this afternoon on the July contract. The high prices come after the June contract closed under $47 last Friday. London’s North Sea Brent crude finished at $48.37 a barrel up 34 cents for the day.
Gasoline played some but opened and finished at $1.40 a gallon. Pump prices around the country remain painfully high average $2.15 a gallon from a variety of sources. These high prices will put pain on the summer driving season, which starts this weekend. Prices have dropped about 6 cents a gallon on average but these prices combined with the high prices of diesel fuel keep the cost of goods and services up and will keep travel down.
Even though U.S. crude inventories continue to swell with a growth last week of 4.3 million barrels and growth expected this week, speculators continue worry about supplies for the 4th quarter, during the winter months when distillate fuels demand, like heating oil and diesel spike. The prices for these fuels traditionally drop off in the late spring and summer and they’ve shown no signs of doing that. The reason is supplies. They remain quite low and since most refineries shifted to gasoline production for the summer, they stocks aren’t expected to grow.
Refineries Are a Problem Too.
Refineries continue to be the weak point in the link of fuel prices. OPEC continues to pump record levels of over 30 million barrels a day. Refineries seem to have one problem after another. Conoco/Phillips has had numerous problems with their facility including a power outage that had put them down for over a month total and despite those problems, the U.S. refineries continue to run at 90%+ capacity. Also refineries in France had severe labor problems as workers started a strike to try and regain a public holiday.
The U.S. hasn’t built a major refinery since 1976 and none appear to be on the way at this moment. President Bush recommended turning defunct military bases into refineries but they take years to build, the profit margins aren’t high, and many don’t want the smelly, ugly, eyesores in their back yard.
What’s In Store?
Most experts predict gas may drop a little more, maybe 5 cents a gallon, according to a Trilby Lindberg in a CBS interview on Monday. In any event, the high fuel costs continue to wreak havoc on the U.S. economy as prices for goods and services continue to climb as do fuel costs for the average consumer.
John Stith is a staff writer for Murdok covering technology and business.
