Gas prices soar past $3.50 per gallon: Are Middle Eastern uprisings to blame?
Whether you measure over a month or a year, gas prices are rising at about the expected rate, say industry analysts, given that oil accounts for roughly two-thirds of the price of gasoline. (Other key factors behind gas prices are the costs of refining, distribution, and taxes.)
As for the price of oil itself, industry analysts differ over whether the $105 range is justified. Much of the recent run-up reflects fears of what could go wrong with oil supplies, rather than with actual disruptions, they say. At the same time, fear and speculation are a normal part of oil-market prices, as traders weigh the expected value of future deliveries.
"There is a strong fundamental case underpinning the oil price rise" when viewed in that context, says Richard Swann, who tracks the oil market at Platts, a leading information provider on the energy industry.
He notes that, amid the economic recovery from recession, global oil demand was overshooting supply by about 1 million barrels per day even late last year, by some estimates.
Thus, even before the wave of unrest in the Arab world, industry inventories were falling, although they aren't yet unusually low.
Now the flow of oil from Libya, one important producer, has been disrupted. Saudi Arabia has pledged that it stands ready to cover any resulting shortfall in global supply.
"It's not a supply crisis," says Platts's Mr. Swann, managing editor of oil news for Europe, the Middle East, and Africa.
