The People of America's Oil and Natural Gas Indusry

Crude Oil Prices at Two-Year High

Jane Van Ryan

Jane Van Ryan
Posted December 6, 2010

Crude oil prices reached a two-year high on Friday. At the end of the trading day, it closed at $89.19 per barrel, up nearly 21 cents a gallon since November 17.

During the same time period, gasoline prices rose 9.7 cents per gallon to a nationwide average of $2.951, which is the highest level since October 18, 2008. AAA reports that 17 states have retail pump prices above $3.00 a gallon.

gas prices.jpgAs we've noted here, historically gasoline prices have tended to track crude oil. The cost of crude oil is the largest factor in the pump price of gasoline. Several factors also can have an impact, including the value of the dollar (oil is traded in U.S. dollars worldwide) and weather. But the fundamentals of supply and demand play the biggest role. As API statistics show:

  • Gasoline supplies are above last year's level and the five-year supply average;
  • Gasoline production has been at record or near-record levels this year; and
  • Gasoline demand was up 0.6 percent in October.

The demand for oil also is rising worldwide, especially in China. "Supplies are tightening a bit," Jim Ritterbusch of Ritterbusch and Associates told Dow Jones. "We've got demand growth taking place globally, and it's proving a bit higher than previously expected."