NEW YORK -- The price of oil has shot up US$11 a barrel in two weeks on rising demand in the U.S. and political upheaval in the Middle East. Gas prices are about to follow.
There's another factor: Bottlenecks that had trapped increasing amounts of domestically produced oil in the middle of the United States are loosening. As that oil reaches the coasts, it can command prices more in line with costlier imported crudes.
An improving U.S. economy is also supporting higher oil prices.
On Wednesday, oil rose three per cent and topped $106 a barrel for the first time since March 27, 2012. A government report showing a sharp decline in crude oil supplies and rising gasoline demand was the catalyst for this latest surge.
Drivers should expect higher retail gasoline prices over the next week or so. Wholesale gasoline prices have risen 20 cents to 40 cents a gallon in some markets since July 1.
The average price for a gallon of gas in the U.S. rose two cents Wednesday to $3.50, according to AAA, OPIS and Wright Express. The price is still 14 cents cheaper than a month ago.
In Canada, the average price was C$1.298 per litre, according to GasBuddy.com, compared with $1.311 a month ago.
Any spike in gas prices could be short-lived. Analysts do not expect oil to rise much further, and many expect the price to soon reverse course.
U.S. oil prices have risen for a number of reasons, analysts say. Chief among them: two weeks of dramatic declines in crude and gasoline supplies that suggest the U.S. economy is picking up steam.
The U.S. Energy Department said Wednesday crude supplies fell 9.9 million barrels in the week ended July 5. Gasoline supplies fell 2.6 million barrels.
In the past two weeks, oil supplies have dropped 20.2 million barrels -- slightly more than one day's consumption in the U.S. -- while gasoline supplies have fallen 4.3 million barrels.
Over the same time, demand in the U.S., the world's largest consumer of gasoline, rose sharply after months of remarkable weakness. Demand rose four per cent compared with the same period last year, to 9.3 million barrels per day.
The price of U.S. oil has suddenly caught up with crude prices internationally. While U.S. oil rose $2.99 to $106.52 Wednesday, Brent crude, an international benchmark used to price oil by many U.S. refineries, rose just 70 cents, to $108.51. The difference between U.S. and international oil is now $1.99 per barrel. On April 1, it was $13.93.
Oil prices around the world began rising during the first few days of July, when political turmoil erupted in Egypt and worries arose that violence could spread and threaten the flow of oil through the Suez Canal, a major conduit for Middle Eastern oil.
-- The Associated Press