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The May WTI crude oil price is up 35 cents to $50.33 a barrel at the close today. On the US West Coast the wholesale spot market price for gasoline and diesel went up 2 cents per gallon in concert with crude oil.

It’s another day – same old story in the petroleum markets.

First – The US Federal Reserve announced a 1.5% month on month decline in industrial production and capacity yesterday. Crude oil prices reacted by going up this morning in reaction to that bad news

Second – Last week the International Energy Agency, headquartered in Paris, lowered its forecast for global oil demand for this year by 1 million barrels a day down to 83.4 million barrels, which is 2.4 million barrels a day below the 2008 level.

Third – US crude oil inventory levels are now at a 20-year high and refineries are running at just 75% of their current capacity. Fuel conservation has forced the oil companies to reevaluate their 2009 game plan in view of the uncertainties in our economy.

Fourth – Gasoline prices went up some more this week. It’s no wonder the average motorist cannot figure out what will be happening to fuel prices in the next month or for that matter the rest of the year. The US average price for gasoline is hovering around $2.05 per gallon today per the AAA fuelgaugereport. The price on the West Coast is still around $2.32 per gallon.

My prediction is that crude oil will continue to hover around the $50 per barrel mark when at the same time gasoline and diesel prices will be increasing steadily upward. On the West Coast the average price for gasoline will be at $2.50 per gallon by Memorial Day and reach for the $3 mark by mid-summer. Retail diesel prices will stay about 10 cents per gallon above gasoline prices. The remainder of the country will follow suit and the average price for gasoline will be $2.50 per gallon by mid-summer.

Refiners have been successful in putting their foot firmly on the hose to constrict the flow of fuel to the market. They have reduced utilization below capacity before their usual planned, maintenance-related springtime reductions. Some shut production down completely earlier this year in order to perform spring maintenance known as turn-a-rounds. The combination of planned and unplanned reductions put 2009 refinery use at its lowest level in the last four years.

The US petroleum industry understands one thing very well and that is that you have to continue to make a profit in order to stay in business. It’s either that or going broke and then they will be out of a job.

Bob van der Valk is the Director of U.S. Branded License Program and Fuel-pricing Analyst with 4Refuel Inc. in Lynnwood, Washington and can be contacted at (971) 678-2975 or by email at tridemoil@aol.com. His viewpoints can be viewed at www.4vqp.com/ourconsultants/thegasguy.html