demand up growth coming recovery slow but inching up...points to niche openings for more fuel efficent transport in all areas...Gasoline price spike due to record oil demand, industry says
ShareretweetEmailPrintSteve Hargreaves, senior writer, On Friday January 21, 2011, 11:56 am
Strong worldwide oil demand and lack of supply are to blame for steadily rising gasoline prices in the United States, an oil industry group said Friday.
The American Petroleum Institute made no specific price forecast for 2011, but didn't seem to see a drop anytime soon.
"Unless we see increases in supply, it's hard not to see a tighter market," John Felmy, the institute's chief economist, said in a conference call with reporters.
Felmy said worldwide oil demand in 2010 hit a record of more than 87 million barrels a day, driven largely by strong growth in India, China and the Middle East.
Supply, meanwhile, was constricted by the drilling moratorium in the Gulf of Mexico following the BP disaster, slow production growth in non-OPEC countries, and OPEC production controls.
"We are committed to supplying our customers, but we face challenges with what is happening to crude oil prices," said Felmy.
Gasoline price have risen 12 cents a gallon, or 4%, in just the last month, according to the motorist group AAA. The nationwide average stands around $3.12 a gallon, less than a dollar below the record high.
Over the last year, prices are up 39 cents a gallon, or 14%. Crude oil is up by a similar percentage, currently trading at just under $90 a barrel.
Felmy called for increased oil drilling in the United States and greater conservation measures as ways to help lower prices.
He did not blame investor interest in commodities for the high prices, as many analysts have, saying if prices were artificially high there would be an overabundance of supply.
"It's probably the right price, supply equals demand," he said. "It really is mostly market fundamentals."
Other analysts have pointed out that thanks to new investments in supply, the difference between what the world can produce and what it actually consumes is about 5 million barrels a day, much higher than the 1-million-barrel-a-day margin seen in 2008, when oil hit a record $147 a barrel.
They argue that there is no supply problem, and the rising prices are instead due to rising interest in crude oil as an investment.
Felmy said most of that 5 million barrels is locked up by OPEC.
Gasoline prices crossed the $3 threshold late last month for the first time since October 2008.
The all-time record high is $4.114 a gallon, set in July 2008. At the time, economists said the record prices were crimping consumer spending, and probably contributed to the economic downturn.
