San Diego gas prices are now at $3.81 a gallon on average, reversing an eight week decline that began on June 2, when fuel prices reached their highest price for the year at $4.25 a gallon. On June Second, the price of oil was $113.50 a barrel on the New York Mercantile Exchange, while today it is hovering at about $95 a barrel.
Our analysis of wholesale prices charged to local dealers shows the average dealer making about a nickel a gallon right now -- a razor thin gross profit margin -- which suggests strongly that prices could continue to reverse the down-trend we've seen for nearly two months.
The news is distressing given that 30 million barrels of oil have been released from the USA's Strategic Petroleum Reserve, plus additional releases from the reserves of International Energy Agency.
Both instances of oil-dumping have failed to dampen the enthusiasm of oil investors such as Goldman Sachs. Goldman Sachs is predicting $120 a barrel oil for Brent Crude in 2011 and $140 a barrel in 2012. U.S. oil prices tend to run lower, which puts West Texas Intermediary (WTI) between $105 and $125 a barrel. As a rule of thumb, every $10 increase in a barrel of oil costs consumers another 23¢ in fuel costs at the gas pump.
It is estimated that the 30 million barrels of oil released from the Strategic Reserve represent about 8 hours of global oil consumption.