Gas Prices Keep Moving Higher, And Ukraine Crisis Is Not Helping

Gas Price Hikes Unabated As Futures Soar Amid Presence Of Russian Troops in Crimea weekly gas price trend

The price of gasoline in the United States continued moving higher during the past week, continuing a trend of rising energy prices that has defied earlier government predictions of a drop in consumer prices through 2014. The U.S. Energy Information Administration’s weekly price survey shows a gallon of regular unleaded gas is now $3.48, about four cents higher than last week and 15¢ higher than the start of 2014. While gas prices are still down from one year ago, the current upward run in prices had not been expected.

First, a nasty series of winter cold spells has strained refineries and supplies of heating oil, propane, natural gas and kerosene, all vital sources of winter heating.

Add to that the increased tensions Europe and Russia, and the result is a new rally in crude oil prices. There was a meager spot of good news this week as gas prices fell slightly in the Lower Atlantic states, but that only served to tame what would have been a much higher average weekly price increase at the national level.

As it was, the 4¢ weekly uptick was fed by price surges in the Midwest, where prices were up nearly 6¢; the Rocky Mountain states, where prices jumped 7¢; and along the West Coast, which also endured a 6¢ price hike. Truckers enjoyed some stabilization of prices this week, with only the Rocky Mountain region suffering a noticeable increase in the price of diesel fuel.

Overall, however, the national average price for a gallon of diesel remained at $4.02 during the  week. Prices increased slightly in California and the lower Atlantic states, while declining along the Gulf Coast.

Futures Surge Amid Russian Troop Movements In Crimea And Tension in Europe

The wicked winter weather in the United States had already pushed crude oil prices somewhat higher, and increased demand in China had also been contributing to a recent rally in energy futures.

However, the crisis in Ukraine, reaching a new peak during the past few days, has moved traders to push the price of West Texas Intermediate to a new high Monday, with the benchmark domestic futures price closing up $2.33 per barrel, flirting with a $105 per barrel price point.

That is a level not seen since the end of September. Brent Light Sweet Crude was over $111 per barrel, although that was down from intraday trades that were over $112.

The New Ukrainian Influence On U.S. Gas Prices

Protesters in Kiev, Ukraine
Kiev, Ukraine – March 2, 2014: Protesters display posters against Russian President Vladimir Putin and the presence of Russian troops in Crimea. Source: Getty Images / iStock Photo.

The interim Ukrainian government’s ambassador at the United Nations, Yuriy Sergeyev, distributed a letter to Security Council members Monday asserting Russia had sent about 16,000 troops into the autonomous Crimea region of Ukraine. Mr. Sergeyev said the Russians were moving to block and control key government and military posts in Crimea.

In Kiev, the capital of Ukraine, protesters continued to demonstrate during the weekend against Russian intervention in the peninsular region, which is historically a Russian territory and is also home to Russia’s Black Sea Fleet.

The tensions pushed investors to shed stock holdings Monday and put money into energy futures, which has added to the soaring price of crude oil, a major driver in consumer gas prices going forward.

WTI was as low as $93 per barrel in November, and one analyst predicted last week short term crude prices could spike between $110 and $113 per barrel. However, that prediction was made before the escalating crisis in Ukraine.

Part of the issue at hand, as tensions continue to mount, is that Russia is a major energy supplier to Europe. About 25% of Europe’s liquid fuels come from Russia, and half of Russia’s pipelines move through Ukraine, which has been economically unstable, in addition to suffering political volatility in recent months.

Supplies In Europe Stable For Now, But U.S. Inventories May Be Declining

While the United States and European leaders debate their response to Russia’s troop movements in Crimea, it was estimated Europe has enough natural gas storage to cover a disruption in supplies from Ukraine for about 45 days. A contributor to that storage surplus is the mildest winter for Europe since 2007. The result has been a higher-than-average inventory for the European Union, according to Gas Infrastructure Europe, a group of pipeline operators located in Brussels.

oil storage tanks
Investors were anticipating heating oil and diesel inventories in the United States would be down this week, possibly adding to new speculative investment in crude oil futures, which could drive futures and consumer gas prices even higher.

Quite the opposite situation was anticipated in the United States, where the Midwest and Northeast have endured their coldest winter in two decades, leading to dwindling stockpiles of heating oil and diesel, possibly as much as one-million barrels during the past week, alone.

Bloomberg News was reporting Monday night that investor anticipation of Wednesday’s EIA inventory report were keeping prices inflated. However, Bloomberg also reported a technical indicator showed that WTI futures were overbought, which may lead to short term futures declines, after all.

How that may affect drivers buying gas at the corner station remains to be seen.

DOWNLOAD THE WEEKLY GAS PRICE SURVEY

Editor's note: This report has been corrected. The original story reported the weekly EIA inventory report would be released on Tuesday. The report is released every Wednesday.

Author: Danny Pryor

Danny has more than 32 years of experience in media, including broadcasting and print journalism, and over two decades of website and digital content development. He is an AP-award-winning reporter and the creator of TurnpikeInfo.com.