Gasoline prices nationwide have edged up to their highest level in six weeks, just as an estimated 600,000 motorists in the Baltimore metropolitan area head out of town for the Thanksgiving holiday.
Traders pushed gasoline futures to a two-month high yesterday as they bet on a continued slide in inventories, partly the result of motor club AAA's prediction for record holiday travel this year. And the Energy Department reported this week that average gasoline prices nationwide rose slightly for the second week in a row - to their highest since Oct. 9.
It means fewer deals for motorists such as Dorothy Wright, a Baltimore resident who is a self-professed bargain hunter when it comes to gassing up her white Honda Accord.
"I look at the pump every day, and whenever I drive by I check out the ones that are the most reasonable," Wright said as she filled up at the Royal Farms station on Key Highway yesterday.
Barring something unforeseen, industry analysts don't expect prices to surge much beyond current levels for the remainder of the winter. They blame the latest increase on a temporary slide in gasoline inventories and slightly higher demand than is typical for this time of year.
Even though oil prices have been trending down in recent months, gasoline has been ticking up as refiners produce less motor fuel and more heating oil.
A gallon of regular unleaded was an average of $2.16 in the Baltimore metropolitan area yesterday, according to AAA. Statewide, the average was $2.18 per gallon.
That's up slightly from a month ago, when the average was nearly $2.12 in the city and almost $2.16 statewide. But it's better than the national average of $2.24, according to a separate report released Monday by the Energy Department. It was the highest in six weeks when prices reached $2.26.
A year ago, regular unleaded averaged $2.15 a gallon in the Baltimore metro area and $2.21 nationally. Still, the latest prices are down about 80 cents since August, when they topped $3 a gallon in most of the region and nation.
Analysts say the recent bump in prices can be attributed to a number of factors, including a reluctance among refiners to keep production levels high in the face of prices that are sharply lower than they were last summer.
The difference between what refiners pay for oil and the price they take in for converting it to gasoline - the so-called "crack spread" - is not as high as it once was, said Doug MacIntyre, a senior oil market analyst with the federal Energy Information Administration. Slimmer profits mean less incentive to produce gas and more incentive to shut down plants for needed maintenance or switch to producing other refined products.
"What's happened is refineries are not processing as much crude oil as they might otherwise do, and so we're seeing crude oil inventories build up," he said.
Falling imports also are playing a role, said Jason Schenker, an economist with Wachovia Securities. When gas prices were high last summer, foreign producers loaded ships with gasoline and sent them to U.S. ports, resulting in record imports and nice profits for overseas sellers. Now that U.S. prices have fallen, those producers have less to gain by shipping abroad.
"Inventories for gasoline have been moving down faster than some people expected," Schenker said.
At the same time, the mild start to winter this year means motorists in northern states have spent less time staying home to avoid slippery roads. That might have contributed to slightly above-average demand, said Stephen Brown, director of energy economics at the Federal Reserve Bank of Dallas.
U.S. gasoline supplies were down 1.9 percent to 200.3 million barrels for the week ended Nov. 10, the government reported. That's slightly below the average during the past five years. Market analysts anticipate the Energy Department will report another drop in inventories today. That expectation helped send futures for reformulated gasoline up 5.3 percent to $1.6427 per gallon on the New York Mercantile Exchange yesterday.
Analysts say the imbalance between supply and demand is probably just a temporary blip and won't result in a big surge in prices.
Schenker and others say the price of a gallon of regular unleaded will probably stay between $2 and $2.25 through winter and then head up as the summer driving season begins.
"I guess I don't really think about it," said Danielle Voce, a Baltimore motorist, referring to the recent bump in prices. "It's just part of life now, right?"
Voce, who recently recovered from a car accident that prevented her from driving all summer, paid about $30 to fill up her Volvo sedan yesterday. She will drive about an hour and a half to visit her family in Virginia over the Thanksgiving holiday.
Analysts say AAA's prediction for record Thanksgiving travel could drop gasoline inventories further, potentially resulting in slightly higher prices in the next few weeks.
But the outlook is for prices that are much more stable than they have been since fall 2005, when hurricanes damaged production along the Gulf Coast. The world is uncharacteristically flush with oil, prompting the Organization of Petroleum Exporting Countries to recently call for production cutbacks. The market has reacted with skepticism to the news, with many predicting OPEC will have difficulty enforcing the cuts among its members.
Oil rose $1.37 to $60.17 per barrel yesterday on news that the Trans-Alaska Pipeline System held back shipments because of poor weather. Volume in the system has been trimmed to 35 percent of normal. Longer term, analysts don't see shortages, barring unforeseen world events or extreme cold this winter.
"I think the key uncertainty that could alter the balance is weather," said MacIntyre, the Energy Department analyst.