Gas prices rise despite 10-year-low demand

COVINGTON -- Gas prices continue to rise nationwide, despite declining oil prices and demand, but the rate of increase is slowing, according to a spokeswoman with AAA Auto Club South.

The national average for a gallon of regular gasoline is $3.38, according to AAA. That's an increase of nearly 16 cents from a month ago and 27 cents from a year ago. In Georgia, the average price is $3.41 per gallon.

"(The increase) is not specific to one state. We're seeing that nationwide. It's pretty common that prices increase after the first of the year," usually because the market rallies with optimism that the economy will improve, said AAA spokeswoman Jessica Brady. Another factor driving up prices of late is the threat from Iran to close the Strait of Hormuz in the Persian Gulf to block oil shipments.

Prices are not rising with the rapidity they did at the first of the year, when they jumped as much as 10 to 15 cents in one week, Brady said. But retail prices are still increasing, though oil prices have dropped and demand is the lowest it's been in a decade.

"It's speculation, not the basic fundamentals of supply and demand," controlling prices at the pump, Brady said. "If that was the case, prices would be much lower. Demand is at a 10-year low. It's not having the effect it should on the market."

Speculation that Egypt would block the Suez Canal during the 2010 uprising drove up prices, though the canal never closed, she added.

"If things continue to escalate with Iran in the coming days, we could see it go up. There's a lot more going on than in the past years, more threats and concerns overseas regarding oil in terms of passageways for exports than in the past," she said.

Though some economists predict gas could rise to $5 a gallon by summer, Brady said it's best to budget for the worst but not worry too much, noting that a top Shell executive predicted prices of $5 to $6 a gallon by summer 2011 that never materialized.

"Plan ahead. Year over year, typically there are higher prices in the summertime. Budget so if they do go up, you're prepared, and if they don't, good," she said.