Recent Oil Price Increases Push Gasoline Prices Higher

In the last couple of weeks, the price of gasoline gained 10 cents per gallon after an oil price rise caused by increasing Iranian tensions, easing European crisis and stimulus hopes from central banks.

The price of gas often lags behind that of crude by about two weeks.

While the average gas price nationwide has only increased by 3% since hitting bottom at $3.33 on the 2nd of July. This current crude price reflects a sharp growth of 17% since reaching its lowest rate of $78.20 on the 21st of June.

Crude oil is now trading at its highest rate since the month of May for a per barrel oil price of almost $93.

Energy broker Andrew Lebow of New York’s Jefferies Bache thinks that retail costs of gasoline will keep on increasing as because futures prices are higher by 40 cents per gallon since June ended. Lebow does not see a rise of 40 cents per gallon in the retail gas prices today. Price increases or reductions take a long time to be passed on to retail purchasers, if ever. However, an increase of five to ten cents in the current gasoline prices is expected in the coming weeks.

The per barrel oil price moved higher at the close of June as the sanctions of the EU and the U.S. on Iran’s alleged nuclear program took effect.

Ever since that time, Iran has repeatedly threatened to block the Hormuz Strait, an important passageway of oil, and since these tensions began a ship of the U.S. Navy fired on a small ship within the Persian Gulf.

Moreover, a recent report that connects Iran to an explosion of a bus in Bulgaria that killed five tourists from Israel is not helping ease the situation.

The current oil prices are also boosted by the improvement of the European debt crisis. In June, there were widespread worries that some countries might leave the eurozone, which can lead the region into a severe recession and weaken oil demand.

Those worries have since been relieved with a set of bailout plans that calmed the markets temporarily. Speculation has also been present that bankers from the central banks worldwide will bring additional money into the world economy. The actions are aimed to strengthen growth, but it can also lead to inflation, particularly in commodities such as oil.

However, disregarding major improvements in the macroeconomy, deteriorating conditions with Iran or several other unanticipated events, current crude prices are unlikely to increase by much in the months to come.