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Gas prices may rise with Egypt unrest

Published:Sunday | February 6, 2011 | 12:00 AM
An anti-government protester holds a placard referring to Egyptian President Hosni Mubarak and reading 'Egypt Better without Pharaoh' at night, during the continuing demonstration in Tahrir square in downtown Cairo, Egypt.- Contributed

Cairo, Egypt: Retail gasolEne prices are likely to creep higher as anti-government protests continue in Egypt and concerns remain about the stability of the Middle East.

The national average for a gallon of regular gasolene was US$3.124 on Friday, according to AAA, Wright Express and the Oil Price Information Service. That's up 2.4 cents in the past week. Analysts expect prices to stay at US$3 a gallon or higher - perhaps rising as much as eight cents over the next two weeks - until the conflict in Egypt is resolved and tensions ease in neighbouring countries.

18-year high

The pump increases come at a time when US gasolene inventories are at an 18-year high of 236.2 million barrels. Crude oil imports are up, too, averaging 9.1 million barrels a day in the past four weeks, which is 641,000 barrels a day more than the four-week period in 2009.

At the same time, motorists are staying off the roads, with demand up less than 1 per cent in the past month, as winter storms hit many parts of the country.

"We will continue to have an amply supplied gasolene market all the way up through the spring and summer," energy analyst Jim Ritterbusch said. "But it's a market that remains subject to the vagaries of geopolitics."

Without the uncertainty about the Middle East pushing up oil prices, retail gas prices probably would have fallen between five and 10 cents recently, PFGBest analyst Phil Flynn said.

Relatively small

Egypt controls the Suez Canal and a nearby pipeline that together carry about two million barrels of day from the Middle East to customers in Europe and America. That's a relatively small amount, compared with the 87 million barrels consumed worldwide every day. Petroleum continues to move through the canal and the pipeline, but traders fear protests could spread to nearby OPEC countries and disrupt supplies.

It was a volatile week for oil prices. Crude started just below US$89 a barrel last Monday and shot up to almost US$93 the same day. The rest of the week, prices stayed between US$92 and US$90 a barrel before dropping again on Friday, back to Monday's level.