Pain at the Pump: Gas Prices on the Rise Reflect Decline in US Dollar

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Posted: Oct 28, 2009 1:16 PM
Have you noticed a spike in your local gas prices lately?  According to AAA, the average price of unleaded gasoline in Chicago "spiked 26 cents a gallon from a month ago to $2.85 and jumped 17 cents from a week ago... Prices are advancing toward the year-ago level of $3.05 a gallon."

Meanwhile, the national average for gas prices hit $2.67 yesterday, after rising for the 13th straight day.

So what gives?  PFGBest analyst Phil Flynn says blame the decreasing value of the dollar for rising gas prices:
[W]eakness in the U.S. dollar has driven the price of oil far beyond what normal supply and demand fundamentals typically bear.
"The increase was driven not so much by demand but by declining gas production and a weakening dollar," Flynn said. "Things are out of whack as refiners have scaled back production to historic lows as their margins get squeezed."