Tight markets, demand spike mean higher gas prices

Nov. 7 (UPI) -- Unseasonably high demand pressures from U.S. consumers and a tightening oil market means higher gas prices, but the trend might not last, market analysts said.

Federal estimates for gasoline demand hit a level last week not seen since October 2006. Jeanette Casselano, a spokeswoman for motor club AAA, said the demand strains came in part because of warmer weather this close to winter, when demand usually plummets.

"As consumers fill up their tanks more frequently, we are seeing supply levels tighten and gas prices increase," she said in a statement. "However, we don't expect this increase to be long-term."

AAA reports a national average retail price for gasoline at $2.53 per gallon for Tuesday, up about 3 percent from last week and 14 percent, or 32 cents per gallon, more than on this date last year.

Last week, the federal government said gasoline inventories were at a seven-week low. Refineries were also producing less gasoline last week.

Meanwhile, consumers in the Great Lakes region, usually one of the more expensive and most volatile markets, faced additional strains because of a leak on the 1,800-mile Explorer Pipeline, which sends consumer fuels from the Gulf Coast to the Midwest. Patrick DeHaan, a senior market analyst at GasBuddy, said repairs on the line were made last week, though it make take some time before consumers see some relief.

AAA said four of the states in the region were among the most expensive in the country, with Illinois taking top honors with a state average price of $2.78 per gallon. Illinois gas prices are more than 25 percent higher than on this date last year.

The West Coast market, typically the most expensive in the country, saw prices spike because of new taxes on gasoline. California added another 12 cents per gallon to fuel taxes, and the average price there is by far the highest in the Lower 48 at $3.21 per gallon.

The overall U.S. market for oil and gasoline is getting tighter, suggesting gasoline prices in the low $2 range may be a thing of the past. Commodity pricing group S&P Global Platts said it expects U.S. exports will be around 7.7 million barrels per day, while imports will be closer to 7.5 million bpd.

Gasoline inventories, meanwhile, continue to tighten and Platts said there's about a 1 percent surplus left based on the five-year average.