Speculation, Not Demand, Fueling Gas Prices, Expert Says

The price of a gallon of gasoline has been on a steady rise since October and one of the chief reasons that drivers are being squeezed is not increased demand, but increased profit, one expert said Monday.

Wall Street speculation is among the leading reasons that gas prices have been on a steady increase for the last six months, said Ben Brockwell, an oil industry analyst with the Oil Price Information Service – an oil industry news service based on Route 138.

“This is not a demand-driven rally (of increased prices),’’ said Brockwell, the oil news service' director of  pricing. “There’s a lot of Wall Street money intrigued by oil as an investment vehicle to make a profit.’’

Nationally, the average price for a gallon of regular gas is $3.83, according to the Automobile Association of America. That’s up 29-cents from an average of $3.54 just a month ago and just slightly less than $1.00 a gallon more than a year ago, when the national average price was $2.86, AAA says.

New Jersey residents have it a little easier, with an average price statewide of $3.69, according to AAA, which gets its price information the Oil Price Information Service.

In Manchester last Friday,, up from $3.30 since we began tracking local gas prices in late-March. That means to fill up a 20-gallon tank, you'd have to shell out more than $70. 

There are other reasons that could explain the recent price spike at the pump, Brockwell said. For instance, the earthquake and tsunami in Japan turned the country from an oil producing country to an oil importing country, he said.

“In the past month, we’ve been rising about a penny a day,’’ Brockwell said. “I think speculation is a big part of that equation.’’

But as the perception that prices are slowing economic recovery, Brockwell said there is some reason to suspect that prices will begin to decrease.

Also, the Chinese government has raised its interest rates for a fourth time, which could arrest its consumption, he said, and signal a return to lower prices for oil, which has been trading at as much as $111 a barrel.

But, Brockwell said he would not count on prices at the pump to dip below the $3.00 range.

“I think the day of reckoning is here,’’ Brockwell said. “But I’d not expect a big drop.’’