Fuel Prices Rise Thanks to Economy Showing Strength

Helena, Mont., March 10, 2010– As springtime teases Montana by appearing one day and gone the next, Montanans are noticing a not so welcome sign that spring is near; an increase in fuel prices. 

Today, the average price of regular unleaded fuel in Montana is $2.76 per gallon; six cents higher than a week ago, 8 cents higher than a month ago; and 82 cents than a year ago.  Montana is following very closely to the National average which is also at $2.76 today.

Fuel prices traditionally take an upswing in the spring due to refineries switching from heating oils over to summer blended fuels and oil investors counting on the potential for increased vehicle travel as the weather improves. But is the current influx an indication of something else?

“Unfortunately or fortunately, depending on your outlook; the increase in fuel prices indicates renewed optimism in the short term health of the US economy, says Denice Harris, AAA Spokesperson. 

Currently the economy is still shedding jobs, but it is doing so at a much slower rate than in previous months.  The labor market is a primary indicator of overall economic health and this job improvement has a ripple effect throughout the economy, including on oil prices as increased economic activity boosts consumption of oil.  As the recovery gains steam and people return to work and resume their normal activities, like travel, demand for gasoline improves as well.

Oil prices have been hovering consistently near the $80 per barrel mark for several weeks.

“So, in the short term, whenever signs emerge the economic recovery is at long last taking hold, oil prices and gasoline prices will drift upwards,” adds Harris.

However, it is important to remember that prices are still somewhat bound by supply and demand.  Supplies remain strong and demand, while improving, remains somewhat soft as well.  These factors alone will likely restrain prices from drifting dramatically higher in the short term.

###