Gasoline futures rose Wednesday after the government reported a surprise drop in the nation's supply.
This could eventually tug pump prices higher, but so far that hasn't happened. Retail gas prices have tumbled for three straight weeks.
The Energy Information Administration reported that gasoline stockpiles fell by 1.3 million barrels last week. Supplies sank as U.S. refineries continued to churn out less fuel.
Gasoline for March delivery gained 2.54 cents at $2.0433 a gallon on the New York Mercantile Exchange.
The EIA report said refineries are operating at the lowest level on record, other than a few weeks in 2008 and 2005 when hurricanes ripped through the Gulf of Mexico and forced many to shut down. The slowdown in American refining comes as higher oil prices squeeze profit margins even tighter. Refineries like Valero Energy Corp. say they simply cannot pass along the higher crude costs to motorists.
Meanwhile, crude prices increased Wednesday despite weak demand and growing supplies. U.S. petroleum consumption has been falling since 2007, and the government report said the country has been using less every week for the past month.
Oil has made sharp gains so far this week as money pours into energy commodities on worries about inflation, said Kenneth Medlock, a Rice University energy economist.
"Massive U.S. debt will persuade people to buy oil contracts and hold them," Medlock said.
The pressure to move money into commodities increases every time investors see headlines like Wednesday's Treasury Department announcement that the government will soon reach its borrowing limit, Medlock said.
Benchmark oil for March delivery lost 8 cents at $77.15 a barrel on the Nymex. In London, Brent crude increased 28 cents at $76.34 on the ICE futures exchange.
Retail gas gave up another half-cent overnight to a new national average of $2.656 a gallon, according to AAA, Wright Express and Oil Price Information Service. A gallon of regular unleaded now costs about as much as it did a month ago, but it's 76.6 cents more expensive than the same time last year.
In other Nymex trading in March contracts, heating oil fell 0.45 cent to $2.0272 a gallon. Natural gas gained 4.6 cents at $5.500 per 1,000 cubic feet.
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