LI fuel prices rise on weak U.S. dollar

There's bad news for drivers and for homeowners who heat with oil: Fuel prices are headed upward again, at least temporarily.

The increase is for reasons that experts say have nothing to do with supply and demand, but much to do with the beating that the U.S. dollar is taking in world currency markets, as well as the stronger stock market.

Regular gasoline rose by 6.2 cents in the past week to an average of $2.90 a gallon on Long Island Wednesday, according to a survey of stations done for the AAA. The new average is almost 19 cents a gallon higher than year-ago prices.

With cold weather approaching, home heating oil jumped by 8.4 cents in the week ended Monday, to an average of $3.099 at full-service dealers on Long Island, according to the state Energy Research and Development Authority. That average is almost 36 cents a gallon higher than a year ago, the state said.

The higher prices come despite federal government figures issued Wednesday that show demand for gasoline and "distillates" like heating oil and diesel fuel fell last week from the week before - and that stocks of them were higher than a year earlier - a supply-demand picture that continues favorably for the consumer and which a week ago prompted some experts to predict further declines instead of increases in gasoline prices.

Energy-market analysts blame the rise in retail prices on an increase in recent weeks in crude oil, which rose in New York trading Wednesday to what Bloomberg News said was a five-month-high settlement price of $83.24 a barrel.

Some analysts say crude oil is following stocks upward - signs of investor confidence - but Richard Soultanian of NUS Consulting, an energy cost management consulting firm based in Park Ridge, N.J., says crude oil futures are rising mostly because investment dollars are flowing to oil - and to other commodities such as gold and wheat - as a hedge against the decline in value of the dollar, especially against the euro.

The dollar's weakness, he said, is due partly to the trillion-dollar plus U.S. deficit and, most recently, to a belief by investors that the Federal Reserve Board is readying a big purchase of Treasury bonds as a way to stimulate economic activity. That would make more dollars available for mortgages, car loans and business expansion. And an improved economy would produce more oil consumption.

Soultanian says a strong dollar and lower oil prices earlier this year were the result of Europe's debt crisis, which increased the dollar's value against the euro. As concerns about Europe have eased, the dollar has lost ground and oil has risen.

"There's tons of oil," said Soultanian - enough in U.S. stockpiles right now to supply the nation for 30 days, he noted.

"Oil is moving up not because there isn't enough, not because there's a lot of demand, but because investors need a place to stick their money right now."

Gallon of

Gasoline

(average for regular)

$2.90

YESTERDAY

$2.838

WEEK AGO

$2.711

YEAR AGO

Source: AAA

Gallon of

Heating Oil

(average, full-service dealers)

$3.099

MONDAY, OCT 4:

$3.015

PREVIOUS SURVEY,

SEPT. 27:

$2.742

YEAR EARLIER

Source: New York State

Energy Research and

Development Authority