Thank you, Mr. Chairman. In EIA s view, this summer s run-up, like other recent price spikes, stemmed from a number of factors. The stage was set for gasoline volatility as a result of tight crude oil supplies, which led to low crude oil and low product stocks and high crude oil prices.
Crude oil continues to be an important factor in explaining price increases over year-ago levels.
From a year-ago June, crude oil price increases have contributed about 33 cents per gallon to the increase in the price of gasoline. Crude oil prices rose as a result of a shift in the global balance between production and demand. Crude markets tightened in 1999 as OPEC and several other exporting countries reduced supply, while, at the same time, the economic recovery in Asia stimulated demand growth. In 1999, world oil demand exceeded production by over 800 thousand barrels per day, reducing world inventories by about 300 million barrels. By the end of 1999, global inventories were at very low levels especially in the United States as shown in Figure 1.