While gasoline demand across the country grew by 3.2 percent in November 2010 over the previous year, demand for diesel fuel spiked 13.2 percent and demand for jet fuel soared nearly 17 percent, a reflection of a growing economic recovery and increasing world consumption.
And, say the experts, these rising energy prices won’t be abating anytime soon.
“Those numbers are staggering,” said Steve Guveyan, executive director of the Connecticut Petroleum Council. “We’re just not used to seeing increases like that.”
The council, which represents large oil companies, refineries, terminals and other major suppliers, is a division of the Washington-based American Petroleum Institute.
Crude oil prices – from which gasoline, diesel, kerosene and propane are derived – have jumped from $80.44 a barrel in mid-November to $91.55 a barrel on Monday.
The AAA says the average price for diesel fuel in the New London/Norwich area on Tuesday was $3.47 a gallon – about 47 cents higher than it was this time last year. Statewide, the price was $3.49 a gallon while nationally it was $3.32 a gallon.
Those gains are taking a toll on consumers. New London resident Daniel McSparren, who relies on diesel fuel to drive his Volkswagen Jetta to work in Meriden, believes suppliers are “gouging the consumer.”
“The price of diesel fuel is (hurting) everybody, and the suppliers are taking an unfair advantage of all the consumers, whether you drive diesel or not, because we purchase those products that are shipped to us daily by diesel trucks,” McSparren said. “And that’s something the government should be looking at – why the disproportionate increase.”
Gene McGillian, an analyst with Tradition Energy, which has offices in Stamford, expects oil prices to range from $95 to $100 a barrel later this year.
And Tancred Lidderdale, a senior economist with the U.S. Energy Information Administration, part of the Department of Energy, agrees.
“We agree that consumption of petroleum products in the U.S. is definitely showing some strength that it didn’t show in the first half of this year,” Lidderdale said. “What that means for consumers is that a global economic recovery is leading to increasing world oil consumption – and higher prices for consumers.
“We’ve been revising upward our forecast for world economic and oil consumption growth for 2010. Our forecast is for rising crude oil prices, which lead to higher gasoline and diesel prices. The rule of thumb is (that) a $1-per-barrel increase in the price of crude oil increases the price of gasoline and diesel fuel by 2.4 cents per gallon.”
Besides growing worldwide demand, two other things are driving costs up, says Eugene A. Guilford, executive director and chief executive officer for the Cromwell-based Independent Connecticut Petroleum Association.
First, crude oil has been “sending signals” on the New York Mercantile Exchange that it will rise as global demand increases. Investors who then see crude rising decide to invest, driving the price up even further, Guilford said. Second, the Federal Reserve is causing inflation by “printing money,” weakening the value of the dollar, and pushing up the cost of gold, food and energy commodities, he said. (Crude oil is priced in U.S. dollars.)
Heating-oil dealers in New London County say their customers are reverting to budget or discount pay-as-you go plans to make costs manageable. Consumers still think the recession and increased U.S. inventories should have a dampening effect on prices, but that isn’t the case, said Mark Mazzella, who owns Benvenuti Oil Co. in Waterford.
“World demand is up, world supply is down, hence oil prices are up,” Mazzella said.