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The October West Texas Intermediate Crude oil price was up $1.50 to $73.98 a barrel last Friday. We have not seen the price of crude oil hit that mark since last October. This current uptick was the result of the bearish Energy Information Administration - Department of Energy (DOE) and American Petroleum Institute (API) inventory reports published earlier in the week. Both reports reflected huge unanticipated draws for all products including crude oil for the week ending August 14, 2009.

That was just the reason needed to increase gasoline prices at the pump to wrap up the vacation season. Nationwide gas prices are $2.62 on Friday heading but will be heading up to $2.75 in the next two weeks. Montana is already at that price and California is at $3.049 per gallon, as reported by the AAA fuelgauge report. Montana will stay below $3 and California will be heading up to the $3.25 per gallon mark.
Thursday’s economic news gave the market a temporary respite with a slight downturn in crude and fuel prices but Friday’s news showed expectations for an increase in gasoline demand with the Labor Day weekend looming ahead in two weeks.
Crude oil price could hit $75 a barrel by next week Wednesday with pressure on gasoline prices to follow upward as well. Doug Larson’s quote: "If all the cars in the United States were placed end to end, it would probably be Labor Day Weekend" is very applicable.
This Labor Day will show yet another increase in gasoline demand for a holiday weekend as it did for the Memorial Day and July 4th weekend holidays.
Even diesel demand is starting show somewhat of a comeback based on the July report from the American Petroleum Institute showing that deliveries in that month increased for the first time in two years. However, this may have more to do with preparations by oil companies to have sufficient stock on hand for the upcoming winter heating oil season. Overall diesel demand for on and off road use is still down significantly versus a year ago levels.
The US Department of Energy has just released their latest forecast for diesel prices over the next year. The average price is expected to level off at $2.46 per gallon in 2009. The prediction of prices in 2010, however, has been raised to reach an average of $2.84 per gallon.
Diesel prices should remain relatively low in Canada and the United States for the next few months before seeing a rise after the end of the year. Prices are not expected to rise to the point of 2008’s average of $3.80 per gallon. Last year saw the highest diesel price in history, with one gallon of fuel costing $4.76 in the US.
The current average price of diesel stands at $2.62 per gallon, which is slightly higher than gasoline. That price is expected to average at $2.34 per gallon for 2009.
Both gasoline and diesel prices will start turning downward again by the middle of October. Nationwide they will go back below $2 per gallon in time for Thanksgiving.
My next article will explain the "Last In - First Out" oil companies’ accounting method, which will be the cause for fuel prices to decrease by the first of next year.
Disclosure: The writer does not have any investment in equities or commodities.
Source: No Clunkers for Labor Day Gas Pump Prices