Gas Prices Rise in January

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February 16, 2005--It's not surprising that gas prices are high, but a dramatic rise in January--usually a time where demand for gas is lowest--indicates that the spring and summer's prices may beat last year's records.

Average prices rose from $1.78 a gallon the first week in January, to $1.91 at the end of the month; for the first week in February. The average price for the first week of February, also at $1.91, was up 27% from a year ago. These prices are just 10 cents short of the average price's 2004 high, which was just above $2 a gallon, set last May.

High gas prices may signal a tough year for businesses dependent on transportation, and businesses dependent on drivers. Small businesses in tourist towns, for example, would suffer when gas prices spike, both because fewer drivers may visit, and because those who do would have less discretionary cash after paying for gas.

Meanwhile, the oil world has its eyes on the Organization of Petroleum Exporting Countries' (OPEC) March 16 meeting, where the cartel could make production cuts. It has been saying it fears a slowing demand in the second quarter, and might cut supply even if demand stays strong.

Demand has, in fact, been stronger than expected, the International Energy Agency (IEA) said last week. It estimates oil consumption this year would rise to 84 million barrels a day--that's 80,000 barrels a day more than the IEA forecasted last month, the upward revisal due largely to high demand from China. The IEA numbers showed inventories falling--they now cover just 51 days of demand--yet another reason for oil- and gas-dependent businesses to worry.

Last updated: Feb 15, 2005




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