MARKET WATCH / THE WALL STREET JOURNAL


Gasoline prices will spike, but it won’t be solely because of Ukraine

March 3, 2014, 12:13 PM ET

 

Drivers will indeed be paying much more for gasoline at the pump in the weeks to come, but it
won’t be just because of the events surrounding Ukraine.


U.S. oil futures rose above $105 a barrel on Monday, so naturally consumers expect that jump in
oil prices to hit the gasoline market.


“Crude-oil prices have surged today on the possibility (not the probability) that the tensions will
lead to some reduction in Russian crude-oil exports, or Russian natural-gas exports,” said Tom
Kloza, chief oil analyst at GasBuddy.com.


“Europe could certainly be a victim of these new hostilities, but the U.S. should not,” he said.
“That is not to say that gasoline prices aren’t likely to move higher in the next 40 days. They will
almost certainly rise, and for today at least, one can blame the $2 [a barrel] or so increases in
virtually all grades of crude worldwide.”


Late Monday morning, April crude CLJ4 traded on the New York Mercantile Exchange
climbed $2.07, or 2%, to $104.66 a barrel. On ICE Futures, April crude UK:LCOJ4 climbed
$2.55, or 2.3%, to $111.62 a barrel.


In response to Russia’s plans for an invasion of the Crimea, “the Obama administration is
requesting European countries to cancel oil and natural-gas contracts with Russia and to instead
get supply from the U.S., Africa and the Middle East,” said Brian Milne, energy editor and
product manager at Schneider Electric.


The events raise “the risk premium in oil prices, and crude and gasoline prices are surging this
morning as a result,” he said. April futures prices for gasoline RBJ4 climbed 4 cents, or 1.4%,
to $3.02 a gallon.


“Traders are ‘Nervous Nellies’ by nature and buy on rumors and sell on facts,” said Bob van der
Valk, senior editor at the Bakken Oil Business Journal. “Refined product futures are following
crude oil by moving sharply higher.”


But at the retail level, the national average price for a gallon of regular gasoline stood at $3.459 a
gallon on Monday, down from $3.456 a day earlier, AAA data show.


“Retail gasoline prices in the U.S. will be more affected by the ongoing switchover from winterto
summer-blend gasoline then [by] happenings in Ukraine and Venezuela,” said van der Valk.


The fuel market, however, is also in the “middle innings of refinery turnaround work, and we are
also seeing some of the highest export totals ever reached for U.S. refiners,” said Kloza.
Refineries tend to do their annual maintenance during the spring.


“Together with misplaced hope that gasoline demand will rise throughout 2014, [that] should
keep upward pressure on gasoline into April,” said Kloza, adding that he sees retail gas prices
potentially rising to between $3.60 and $3.75 by Easter Sunday — about a 35- to 40-cent
increase from autumn lows.


–Myra Saefong
Follow Myra @MktwSaefong.
Follow The Tell on Twitter @thetellblog.
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