Oil and gasoline prices are rising

If you've gone to the gas pump lately and thought prices were higher, you're right.

The average price of regular unleaded gasoline was at $3.364 a gallon on Tuesday, according to AAA's Daily Fuel Gauge Report. That's up 2.2% this month and 4.5% since hitting a 2012 low of $3.219 on Dec. 20.

The move parallels rising oil prices. Crude oil in the United States is approaching $100 a barrel for the first time since May 2012 and could hit that level any day, says Peter Tuz, president of Chase Investment Counsel in Charlottesville, Va.
Light sweet crude (-CL) in New York settled Tuesday at $97.57 a barrel, up $1.13 from Monday and 6.3% this month alone.

Brent crude, the benchmark North Sea crude, settled up 88 cents to $114.36 a barrel in London. Brent, which is up 2.8% in January, influences U.S. gasoline prices as much as light sweet crude.

The gains for oil and gasoline appear to reflect two forces:

• Optimism that economies globally will do better than expected, particularly the United States.
  
• Continued worries about protests and terror attacks in North Africa and the Middle East. The civil war in Syria and worries about Iran are playing a role in the oil-price run-up.

If you want some good news about the rising prices, it's just that the gains so far aren't as big as a year ago.

By Jan. 29, 2012, gasoline was up 4.4% to $3.419 while crude oil in New York was flat, but Brent crude was up about 3.8% at $111.46 a barrel.

Another reason for higher prices, suggested Arjun Sreekumar on the Motley Fool, is that production costs for crude oil are rising.

Between 2001 and 2010, the average annual price of Brent increased 228%, while marginal production costs among the world's 50 biggest public oil companies rose 229%, according to calculations by Bernstein Research.

The price of Brent crude is up 462% since the end of 2001. Light sweet crude in New York, however, is down 1.4%. Light sweet crude did hit reach $145.29 a barrel on July 3, 2008 and was a contributing factor to 2008-2009 recession.

But Tuz is a little surprised by the oil-price run-up. U.S. prices should be lower if only because of the big increases in supply coming from shale deposits in North Dakota, Texas and elsewhere.

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