Bloomberg News

Gasoline Futures Gain as U.S. Budget Deal Averts Fiscal Crisis

January 02, 2013

Gasoline rose as Congress approved a budget deal that averts spending cuts and higher taxes for most Americans that threatened the U.S. economic recovery.

Futures climbed as the House passed a bill undoing income tax increases that took effect yesterday for more than 99 percent of households. The bill, already passed by the Senate, avoids more than $600 billion a year in scheduled spending reductions and tax gains known as the fiscal cliff.

“The market is relieved that tax rates will not be rising for the majority of Americans,” said Andy Lipow, president of Lipow Oil Associates LLC in Houston. “Spending cuts have been deferred for several months and demand will continue on its regular seasonal path.”

Gasoline for February delivery gained 4.77 cents, or 1.7 percent, to $2.8094 a gallon at 9:32 a.m. on the New York Mercantile Exchange. Prices climbed 4.7 percent in 2012. Trading was closed yesterday for the New Year’s Day holiday.

Congress must now act as early as mid-February to raise the nation’s $16.4 trillion debt ceiling. Republicans are expected to use the need to raise the limit to force President Barack Obama and congressional Democrats to accept cuts in entitlement programs such as Medicare. A similar dispute in 2011 led to a downgrade of the U.S. credit rating.

“The market pushed higher on idea we’re not going to go off the fiscal cliff,” said Gene McGillian, an analyst and broker at Tradition Energy in Stamford, Connecticut. “The next level for gasoline is $2.90 to $3. But the next wave of gains will be predicated on signs the economy is improving.”

Heating oil for February delivery gained 3.37 cents, or 1.1 percent, to $3.0655 a gallon. Prices rose 3.8 percent in 2012.

The average nationwide retail price for regular gasoline fell 0.1 cent to $3.291 a gallon, AAA said today on its website.

To contact the reporter on this story: Barbara Powell in Dallas at bpowell4@bloomberg.net

To contact the editor responsible for this story: Dan Stets at dstets@bloomberg.net


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