There has been a lot of talk about a New York Times piece that seems to suggest that at least so far, record high gas prices have not hurt the economy. Perhaps not here but that may not be true in Europe as weak UK data helped send global oil markets tumbling. And oh yes, we had that story that the French may be joining the US and the UK in releasing oil from their strategic reserve. There also was a build in oil inventory and we will get to that, but let's first focus on Europe.
Gas prices in the UK are approaching $10.00 a gallon. Britain's economy shrank a revised 0.3% in the final three months of 2011, worse than the 0.2% drop previously estimated. In Europe prices for oil are at record highs. According to some fine work from the Energy information Agency it seems that on a euro basis, the spot price for Brent crude oil, a global benchmark, has surpassed its prior record high and set a new record high of €96.53 per barrel on March 13, 2012, as the currency exchange rate has declined. The prior record of €92.76 per barrel was set on July 3, 2008. However, on a U.S. dollar basis, the spot price for Brent crude oil remains under the prior record high of $145.66 per barrel, which was set on July 3, 2008. On March 13, 2012, the Brent crude oil spot price was $126.30 per barrel.
From Jan. 3, 2012 to March 26, 2012, the spot price for Brent crude oil in euros rose from €85.66 per barrel to €94.61 per barrel, or 10.4%. During the same period, the spot price for Brent crude oil in U.S. dollars increased from $111.79 per barrel to $126.39 per barrel, or 13.1%. Several factors underpin the increase in global crude oil benchmarks since the start of the year.
Although the price of crude oil increased by more than 10% since the beginning of the year, the retail prices of petroleum products in Europe rose only about 4% to 7% because of the inclusion of duties and taxes, which are typically a much more significant share of the retail pump price of motor fuels in Europe than in the United States. From Jan. 9, 2012 to March 19, 2012, the European Union-weighted retail gasoline price rose from €1.55 per liter to €1.65 per liter, or 6.5%, according to data from the European Commission Oil Bulletin. During the same period, the European Union-weighted retail diesel price rose from €1.46 per liter to €1.53 per liter, or 4.3%.
Will France be complicit in a plan to join the US and the UK in a seemingly politically inspired move to release oil from our global oil reserves? The AP reported that France's government says it is considering releasing oil from its strategic reserves as part of a US-led effort to increase supply to bring down high prices. Industry Minister Eric Besson said, "The United States asked, and France welcomed this hypothesis." Government spokeswoman Valerie Pecresse said France is waiting for recommendations from the International Energy Agency before tapping its oil reserves. She said the French government is also pressing oil-producing countries to release more oil on the markets to ease prices. The AP says that like in the United States, high gasoline prices have been an issue in the campaign for France's presidential elections. Hmmm.
Our ship has finally come in! In the Gulf Coast last week! Oil that has been fog delayed and has wrecked havoc with the oil data for the last three weeks might be getting caught up with reality. The EIA reported U.S. crude oil imports averaged about 9.3 million barrels per day last week, up by 1.0 million barrels per day from the previous week. Over the last four weeks, crude oil imports have averaged 8.7 million barrels per day, 44 thousand barrels per day below the same four-week period last year. This led to a build in crude supply of a whopping 7.1 million barrels from the previous week. At 353.4 million barrels, U.S. crude oil inventories are in the upper limit of the average range for this time of year. Total motor gasoline inventories decreased by 3.5 million barrels last week and are in the upper limit of the average range. Both finished gasoline inventories and blending components inventories decreased last week. Distillate fuel inventories decreased by 0.7 million barrels last week and are in the middle of the average range for this time of year.