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Gasoline prices are up for second week

01:00 AM EDT on Tuesday, October 27, 2009

All of a sudden, it seems, gas prices are rising again.

The average price of regular self-serve gas jumped 13 cents a gallon, to about $2.69 — an increase of 5.1 percent in a single week, according to the results of a survey posted on Monday by the Rhode Island Office of Energy Resources.

It was the second consecutive week that pump prices have risen, according to a separate report issued Monday by the auto club AAA Southern New England.

So what is going on? Lloyd P. Albert, the auto club’s senior vice president of public and government affairs, said that broader market forces are at work.

Sensing the potential for profit, some investors are putting money into commodities — including oil, Albert said.

And because oil represents a big chunk of the cost of gasoline, gas prices have risen accordingly, he said.

The state Office of Energy Resources survey results also showed that the average price of diesel fuel jumped by 10 cents a gallon, to about $2.82, an increase of 3.7 percent over the last week.

There is some room for prices to move higher, given that gasoline prices are lower than they were a year ago or so, said Edinaldo Tebaldi, assistant professor of economics at Bryant University in Smithfield.

But it is unlikely that a long-term trend of rising fuel prices is under way, Tebaldi said. If the U.S. economy and some other major economies in the world were growing robustly, then fuel prices would also rise, “But that’s not the case,” Tebaldi said.

Albert reached a similar conclusion. Overall demand nationwide is soft and crude oil supplies are abundant, he said. Thus, “I don’t see much reason to be concerned about rapidly escalating prices,” he said.

In the “very short-term,” gasoline prices may move up, but the higher prices probably will not hold, Albert said.

The auto club’s target price for regular unleaded gas is about $2.65 a gallon over the next two months or so, meaning that the club does not see prices rising much higher than that.

Another factor in the complicated mix is the declining value of the dollar, Albert said.

In general, as the U.S. dollar drops in value against some other currencies, it takes more dollars to buy foreign oil.

But the dollar strengthened yesterday, and in late-day trading the price (in dollars) of a barrel of oil fell more than 2 percent, the Associated Press reported.

— Journal Staff

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