Gasoline prices are only $0.24 off the record highs hit in July of 2008 and have been climbing at a time when they should be falling, according to the AAA Daily Fuel Gauge Report.
The price of a regular gallon of unleaded gasoline is averaging $3.86 a gallon, down from $3.87 Friday and well above $3.60 a year ago and just shy of the record $4.11 hit in July of 2008.
Prices normally dip during September, but ongoing Middle East tensions and lingering effects from Hurricane Isaac are keeping prices elevated, among other reasons such as refinery and oilrig maintenance issues.
Editor's Note: I Wish I Were Wrong — Economist Laments Being Right. See Interview.
“We’re seeing the highest (or close to) gas prices of the season this week in a rare September upswing,” said Martha Meade, manager of public and government affairs for AAA Mid-Atlantic.
“However, experts believe this ‘last hurrah’ will be short lived. AAA expects prices at the pump will begin to decline midway through September and continue for the last few months of the year as demand decreases and the switch to less-expensive, winter-blended gasoline begins, bringing much needed relief for motorists.”
Oil prices, however, might see some added upward pressure thanks to the Federal Reserve, which announced plans to roll out a third round of quantitative easing to jolt the economy.
Specifically, the Fed will buy $40 billion in mortgage-backed securities a month from banks on an open-ended basis, injecting the economy full of liquidity in the process to spur recovery, weakening the dollar in the process.
A good deal of that liquidity makes its way into commodities markets.
Hard assets rise in value when the Fed moves and the dollar weakens, oil particularly, since it trades in dollar-denominated exchanges and becomes a nicely priced asset in the eyes of investors holding other currencies.
“The Fed will be indirectly adding more liquidity into the asset markets and that money will need to go somewhere and part of it will go into commodities, even if current commodity prices are already at demand-destruction levels,” said Olivier Jakob at Petromatrix in Zug, Switzerland, according to Reuters.
Editor's Note: I Wish I Were Wrong — Economist Laments Being Right. See Interview.
© 2013 Moneynews. All rights reserved.