Gaza Conflict Sends Gas Prices Higher to Start 2009

The Oregon average for regular unleaded increases six-and-a-half cents in the past week to $1.81 while the national average gains seven cents to $1.69.

Salem-News.com

(PORTLAND, Ore.) - Continued fighting between Israeli and Palestinian forces in the Gaza Strip over the past week, and optimism for a resumption in economic growth in 2009 have propped up the price of oil and sent pump prices higher to start the new year, says AAA Oregon Public Affairs Director Marie Dodds.

"The Oregon average for regular unleaded increases six-and-a-half cents this week to $1.81, while the national average gains seven cents to $1.69. Despite the increases, drivers are still paying the lowest prices in nearly five years with the Oregon and national averages at their lowest point since February 2004."

She says just a year ago our national and Oregon averages were at $3.11, and crude oil first passed $100 a barrel.

Crude oil is trading around $49 per barrel today, an increase of about $9 in the past week, and up more than 40% since mid-December. Crude hit a four-year-low on December 19 when it dropped to $32.40 a barrel.

In addition to the escalating conflict between Israel and Hamas, energy prices are also strengthening this week amid expectations that President-elect Barack Obama and his administration will help jumpstart the faltering economy, which could lead to an increased demand for oil and gas. Also, OPEC production cuts of more than two million barrels a day went into effect at the first of the year.

Whether any of these developments will have a lasting impact on oil and gas prices remains to be seen since slack demand for energy worldwide must increase if prices are going to move higher for the long term. This is especially true for crude prices, which can remain low even if pump prices increase and gasoline inventories in the U.S. start to dwindle due to refinery cutbacks.

AAA believes the eventual return of a more peaceful situation in the Middle East and the coming release of negative year-end economic data will probably send oil and gasoline prices lower in the next few weeks, although lower prices are not as certain as they were before the conflict in the Gaza Strip erupted.

The lowest average price in Oregon is found in Salem where the average for a gallon of gas is $1.765. Portland's price is close, with a recorded average of $1.795.

In the Eugene/Springfield area, drivers are paying an average of $1.839 at the pump, and motorists in Medford/Ashland are seeing an average cost of $1.913.

Self-serve gas in the Vancouver, Washington area is going for $1.855.

AAA says only two states still have averages for regular unleaded at or above $2 a gallon, same as last week. The most expensive gas in the country for the 28th week in a row is Alaska at $2.50, followed by Hawaii at $2.28, California at $1.89, Washington at $1.86 and Michigan at $1.85.

Washington was fifth most expensive last week. Oregon's gas prices are 12th highest, down from ninth last week. Wyoming has the least expensive gas with regular unleaded at $1.43 a gallon.

Diesel prices are holding fairly steady. The national average drops two cents to $2.41, while Oregon’s average remains at $2.46

Hawaii has the highest statewide average price for diesel again this week at $3.96, followed by Alaska at $3.58, District of Columbia at $2.97, New York at $2.85, and Connecticut at $2.77.

Oregon's average diesel price is 16th most expensive this week, up from 22nd last week. Washington's diesel price increases two cents to $2.53 which is 13th highest, up from 14th last week.

A year ago, the national average for diesel was $3.45 and Oregon's average was $3.44.