Experts: Higher gas prices sign of recovery

By Johnny Jackson


U.S. energy officials say higher energy costs, this summer, may be an indication of a recovering economy.

"I think most measurements of the economy are that it is starting to turn around," said Doug MacIntyre, a senior energy and oil market analyst with the U.S. Energy Information Administration (EIA).

MacIntyre noted a positive correlation between increasing crude oil prices and the optimism in global financial markets.

The EIA released its updated Short-Term Energy and Summer Fuels Outlook on Tuesday, anticipating crude oil prices will average above $81 per barrel this summer, between April and September.

MacIntyre said the outlook accounts for crude oil priced at slightly less than $81 per barrel for 2010 as a whole, and $85 per barrel by the fourth quarter of 2011.

"The big thing this month is that we take a more detailed look at the gasoline outlook," he said. "It's sort of a mixed bag, depending on your prospective."

The EIA forecast update notes an expectation that gas prices will remain relatively flat for now, with regular unleaded prices averaging a projected $2.92 per gallon this summer. The price is higher than the $2.44-per-gallon average last summer.

"[The year] 2008 was almost like two different years," MacIntyre continued. "The economy didn't really collapse until September. Following the financial collapse, and the economic downturn, we saw oil costs go down dramatically."

The summer prior, however, gas prices spiked well above $3 per gallon, he said, noting that the tanking economy played a large part in the gas price reductions of 2009.

He added that regular unleaded gas prices are likely to exceed $3 per gallon at times during this summer's driving season, and already exceed $3 per gallon in some areas.

The EIA forecast places the annual average price for regular unleaded gas at $2.84 per gallon for 2010, up from a $2.35 average for 2009 and below the $2.96 average expected for 2011. MacIntyre said the annual increases in average gas prices are due primarily to projected rising crude oil prices.

Rising crude oil prices are the result of favorable news of the global economic recovery, according to AAA Auto Club South Spokeswoman Jessica Brady.

Brady said a pick-up in manufacturing jobs and production was reported in the U.S., China, Japan, and Europe. It is viewed as evidence of a rebound in international trade. U.S. companies added 162,000 jobs in March, with fewer Americans filing for unemployment, according to the U.S. Department of Labor.

There are also signs that Georgia's economy may be in the midst of a turnaround, according to reports from the governor's office.

Gov. Sonny Perdue on Tuesday announced net revenue collections for the month of March totaled $998.24 million compared to $987.99 million for March 2009, an increase of more than $10 million, and the first monthly increase in revenues since November 2008.

"While we are always cautious about reading too much into a single month's revenue report, the March numbers are certainly encouraging," Perdue said in a statement. "Spring-time in Georgia always brings us the Masters and the Braves' opening day, and I am hopeful we are also seeing the first buds of economic recovery."

Brady said news that an economic recovery may lay ahead has caused the market to rally on the prospect that fuel demand will increase this year and has pushed crude oil prices well beyond $80 per barrel on the New York Mercantile Exchange (NYMEX). By late Tuesday afternoon, crude oil prices reached $86.86 per barrel on the NYMEX, according to Bloomberg.com.

"We will most likely see crude oil stay above $80 a barrel for quite some time, causing retail gasoline prices to steadily increase into the summer," Brady said.

The national average price for regular unleaded gas remains below $3, according to AAA's Fuel Gauge Report. The report said Tuesday's national average price of regular unleaded gas was $2.83 per gallon as Georgians paid an average $2.73 per gallon and metro Atlantans paid $2.71 per gallon.

"It's a bull market right now, and investor confidence is high that fuel demand is on the rise, even though it may be a while before we see if fundamentals support the move higher," Brady added.