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GASOLINE AND
DIESEL DEMAND DROPS
Prices should be going
down - but they're not -
why?
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Once again, high fuel prices are dampened travel
plans this holiday. More Americans stayed home than on the
Fourth of July than last year, just as they did during the Memorial
Day weekend.
With fewer people on the road, retailers have seen demand for fuel
drop, according to data released today by NATSO, the national
association representing America's travel plazas and truckstops.
Ask any economist what happens when a product's supply is ample but
demand is lower, and you'll hear that the price of that product is
likely to fall.
Not so with gasoline and diesel fuel this year, based on demand data
released by NATSO. Demand for both gasoline and diesel dropped
significantly in May, even while wholesale fuel prices (the cost of
fuel that retailers pay) continued to climb.
The number of gallons of gasoline sold fell nearly three percent in
May as compared with last May 2007, and diesel gallons sold dropped
twice as much that month, by about six percent. Declines of demand
for fuel greater than 2.5 percent are rare, even more so in a time
that is considered to be peak driving season.
Despite these declines, during that same month gasoline and diesel
wholesale prices surged. According to the Oil Price Information
Service (OPIS), the average wholesale cost of fuel sold to retailers
climbed throughout May and June. Retailers were paying an average 37
cents over the prior month for gasoline and an average of over 60
cents more for diesel, topping the $4 mark for the first time ever.
Softer demand and higher prices lends further support to experts who
have pointed to unregulated market speculation as a significant
culprit in higher fuel prices.
"In the past, when we've seen skyrocketing fuel prices like this, it
is because of some crisis that squeezes supply," said president and
CEO of NATSO Lisa Mullings. "We've seen no long lines at the pump;
in fact, demand has fallen and supply is adequate, so it is clear
that there is another factor driving up prices." |
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