Drivers may wonder why gas prices are on the rise again, given that the factors that usually drive cost — demand, the commodities market — would seem to favor lower prices.
That wonder, however, would be misplaced. While the recession helped drive prices down from their record levels of last summer, December and January fuel prices were artificially low.
AAA Mid-Atlantic, in a press release, hints at this:
Gasoline refiners have been severely cutting back their output of gasoline either by design or due to “maintenance and operational issues”. Which has industry watchers who trade gasoline futures expecting that OPEC and US refiners will be able to cut output enough to bring supply and demand into balance over the next few months.
Which implies that supply and demand have been out of balance — leading to the wild swings we’ve experienced over the last year or so.
Balance, however, is an elusive quality and, like beauty, in the eye of the beholder. Drivers obviously desire that “balance” lead to low fuel prices, while the oil companies have a different sense of what it means.
The reality is that we have lived for a long time with artificially low fuel prices that have encouraged an unsustainable style of living that will have to change — both for environmental and longterm economic reasons.
Hank Kalet 