Gas and diesel prices rising again; big oil earnings expected
Motorists will likely find little relief at the gasoline pump in the coming weeks. Prices are rising again after consumers experienced only modest decreases in costs in May and June. The average price of a gallon of regular gasoline is far above levels seen last summer, and the gap may not decrease anytime soon.
"The cost of oil has come back up and Brent crude, the European benchmark in stock market trading, is very high. That's the primary reason," said Phil Flynn, an analyst with PFGBest Research in Chicago. "Refineries reached their highest production rates of the year last week, but it's been a bad year for them until now, with storm damage, floods, power outages and pipeline problems. That has also had an impact."
In California, the average price of a gallon of gasoline climbed to $3.817, up from $3.803 a week ago, according to the AAA Fuel Gauge Report. The state's average had fallen for six straight weeks since May 2, but that was not nearly enough to counteract the relentless eight- month rise in prices that began in September, 2010 and continued through April of this year.
In July 2010, the state's average for regular gasoline was $3.151 a gallon, according to the AAA.
Nationally, the average price for a gallon of regular gasoline rose to $3.694, up from $3.676 a gallon a week ago, the AAA said. Before last week, prices had dropped nationally for seven straight weeks. A year ago, a gallon of regular in the U.S. cost just $2.737.
Truckers, farmers, construction companies, warehouse and cargo-distribution hubs and railroads were also feeling the pain as diesel prices were also on the rise. The average price of a gallon of diesel in California hit $4.240, up from $4.228 last week, the AAA said. A year ago, a gallon of diesel in California cost $3.231. Nationally, the average for diesel has reached $3.956 a gallon, up from $3.942 last week and $2.949 a gallon a year ago.
The AAA gets its averages from retail receipts from more than 100,000 service stations across the U.S., compiled by the Oil Price Information Service and by Wright Express.
Meanwhile, supporters and detractors of the global oil industry launched opening verbal salvos in anticipation of announcements later this week of sizable increases in second-quarter earnings. Occidental Petroleum and BP earnings reports are set for Tuesday, followed by Conoco Phillips on Wednesday, Exxon Mobil and Royal Dutch Shell on Thursday, and Chevron on Friday.
Fadel Gheit, senior energy analyst for Oppenheimer and Co. said he was expecting the oil industry as a whole to report its highest second-quarter earnings since 2008. "It's a rising tide that raises all boats," Gheit said in a note to investors.
"When our industry does well, America does well too," said Kyle Isakower, vice president for regulatory and economic policy for the institute. Isakower said that the oil industry produces 7.7% of the nation's gross domestic product.
Isakower said that the teleconference was designed to counteract potential consumer outrage over oil company earnings. But he added that the primary concern was the stalemate in Washington over the cutting the deficit and raising the nation's debt limit, and the possibility that the oil industry might bear the brunt of any increased taxes.
"A wise policy" for Washington, Isakower said, would be to allow greater exploration and production in the U.S. He later said "an unwise policy would be tax increases that could reduce oil industry employment by 170,000 jobs, reduce oil production and reduce revenues to the federal government."
But another group had quite a different message: Don't depend on the oil industry; the only real path to price relief at the gas pump and reduced dependence on foreign oil will come from ramping up the federal standard for gasoline mileage.
That was the message Monday from Go60mpg, an umbrella group representing Environment America, the National Wildlife Federation, the Natural Resources Defense Council, the Safe Climate Campaign, the Sierra Club and the Union of Concerned Scientists.
The Go60MPG campaign also unveiled its latest ad pitch: "The good news is that there is a home-grown American solution: a 60 mile-per-gallon fuel efficiency standard by 2025. Experts say 60 miles-per-gallon would mean 700,000 new jobs in the USA. It would make America safer by cutting our oil use by more than we now import from the Persian Gulf. And, best of all for consumers, 60 miles-per-gallon would mean $650 billion in savings at the gas pump."
On Monday, oil was slightly weaker in major trading markets. The European benchmark, Brent crude, fell 38 cents to $118.29 a barrel on the ICE Futures Exchange in London. The U.S. benchmark, West Texas Intermediate crude, was down 53 cents to $99.34 a barrel on the New York Mercantile Exchange.
-- Ronald D. White
Graphic: The AAA rolling 12-month average for regular gasoline prices in California and the U.S. Credit: AAA