Fuel Prices Expected to Fluctuate Over Summer

May 28, 2010 by · Comments Off on Fuel Prices Expected to Fluctuate Over Summer 

Surprise! Looks for fuel prices to fluctuate this summer.

Surprise! Looks for fuel prices to fluctuate this summer.

As the Memorial Day weekend kicks off the summer, this seasonal question is on the minds of travelers everywhere: Where are gasoline prices headed?

Don’t be shocked if they top $3 per gallon, but be pleasantly surprised if they drop to less than what you are paying now, according to a release from Purdue University, West Lafayette, Ind.

It all depends on how the economic principle of supply and demand reacts to conditions globally, says Purdue University agricultural economics professor Wallace E. Tyner, who tracks gasoline prices daily. He expects price fluctuations throughout the summer.

Tyner had predicted earlier this year that gasoline prices would run between $2.60 and $3.20 per gallon this summer in Indiana. His prediction is unchanged.

Although the national average price of regular unleaded gasoline last week was $2.79 per gallon — 35 cents higher than at this time last year — Tyner said prices have been “pretty stable” this year.

Key drivers of gasoline prices this summer, Tyner said, will be the value of the dollar, production levels by the Organization of Petroleum Exporting Countries (OPEC), political stability — especially in the oil-producing regions — and U.S. crude oil gasoline inventories.

The OPEC nations, which heavily influence world oil prices, have said they want the price of a barrel of oil to stay in the range of $60 to $80, which would keep gasoline prices to Tyner’s predictions if all other indicators remain stable. Just this week, however, the price rose from $68 to $75. Look for prices to rise next week if oil stays up, Tyner said.

In addition, consumers take more vacations in the summer, drive more and, as a result, use more gasoline. If the U.S. stock market rises and the economy continues to improve, demand for oil will increase, leading to higher prices.

A drop in the stock market would have the opposite effect.

“If the mood in the markets turns dour and economic growth prospects seem diminished, that will put downward pressure on oil prices,” Tyner said.

Here’s one rule to help you with a best guess on whether gasoline prices will go up or down: When the value of the dollar increases, as it has done recently, the price of oil falls. Conversely, when the value of the dollar falls, the price of oil tends to increase.

Indiana consumers no doubt noticed a swing of about 30 cents per gallon in gasoline prices in May.

“With the volatility in Europe, the U.S. dollar has been moving around quite a bit in the past few weeks,” Tyner said.

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