gasoline prices

The nation has entered uncharted waters as gasoline prices rise, and some experts say that could spell trouble for consumer spending that's helping fuel the economic recovery.

The price of a gallon of gasoline has never approached $4 a gallon in April, and if the historical pattern holds, prices are likely to continue to climb through mid-July, when prices historically peak during the summer driving season.

Tom Kloza, chief oil analyst for the Oil Price Information Service, which surveys fuel prices nationwide for AAA, expects gasoline prices to peak in the coming months between $3.75 and $4 a gallon.

And should gasoline stay at $4 a gallon for an extended period of time, Kloza predicts a big pullback by consumers, because they will have about $12 billion less to spend each month than they did last year, when fuel prices were more moderate.

Those who will be hurt most "of course are the people who can least afford it," said Bill Sirakos, chief economist at Frost Bank in San Antonio.

"Think about the poor guy driving a dump truck for $12 an hour. It's just destroying his household budget."


In Houston, the price of a gallon of regular unleaded gas has climbed $1.01 a gallon, to $3.74, according to AAA. And in San Antonio, the price of a gallon of regular unleaded gas has jumped almost 99 cents a gallon in a year, to $3.67, AAA surveys show.


But on the flip side, higher oil prices — the main contributor to rising gas prices - help spur job growth in Texas.

When oil prices are high, job growth in Texas historically has exceeded that of the nation by a percentage point, said Keith Phillips, senior economist at the San Antonio branch of the Federal Reserve Bank of Dallas.

"When energy prices are high, the relative growth of Texas is greater than that of the nation," Phillips said.

Rising oil prices also will contribute to more exploration in Texas, including in the Eagle Ford shale south of San Antonio, a 400-mile-long swath where drilling has boomed in just two years' time.
Bigger royalties

And higher oil prices would mean greater royalty payments to landowners who've leased land in the Eagle Ford shale, Phillips said. San Antonio could benefit from their increased spending.

While gasoline prices today "are a hurt," said economist Travis Tullos of the Austin-based consulting firm TXP, he believes oil and gasoline prices won't stay high for a sustained period.
A temporary thing?

"Supply and demand don't seem out of whack," Tullos said. "Almost all of OPEC's top command is saying there's no problem meeting demand. So I think this situation is temporary."

A Federal Reserve survey released Wednesday indicated that the nation's economy improved in every part of the country this spring. Factories were busier, consumers spent more and companies boosted hiring in all 12 of the regions the Fed surveyed.
Retail sales up

And so far, higher gasoline prices haven't put a big dent in retail spending.


In March, retail sales rose 0.4 percent, the Commerce Department said Wednesday. In addition to spending more on gas, consumers shelled out more for furniture, electronics and at restaurants, Commerce said, and marked the ninth consecutive monthly gain.

Americans have made changes in their driving habits, at least in the last six weeks. That may have helped spending in other areas.

Purchases of gasoline fell for the sixth consecutive week for the seven days ending April 8, according to data from MasterCard SpendingPulse, which estimates spending across all payment forms, including cash and check.

Gas Prices Rising

Like it or not, gas prices are on the rise, and some experts predict we could see $5-per-gallon gas before summer. But why?


Offset high gas prices by saving money on auto insurance.

There are a number of different reasons.

First, Americans are driving again. The Department of Transportation reports that Americans drove nearly 3 trillion miles in 2010—the most since 2007 and a 0.7 increase over 2009. As gas prices rise, expect that number to fall once again.

Second, anti-government protests in the Middle East have hurt supply. It’s no coincidence that gas prices spiked as unrest in Egypt swelled in January. With major uprisings in Libya and a mood of dissent spreading across the Middle East, supply interruptions may persist indefinitely.

Third, global demand for oil is on the rise. Nations like India, China and Indonesia are booming economically and are buying up a greater share of the world’s oil. Unfortunately, the major oil-producing nations of OPEC haven’t significantly increased supply since the 1980s. And when supply doesn’t increase along with demand, prices increase.

Finally, a weak U.S. dollar is making oil cheaper for other nations. Oil is priced in U.S. dollars, so a weak dollar gives foreign countries more buying power. The value of the U.S. dollar has dropped nearly 40 percent since 2001.

In an effort to offset rising gas prices, many drivers are looking to make their vehicles more fuel-efficient. Despite the many fuel-saving myths circulating—e.g., chemical additives—there are a few tried-and-true methods to boost fuel economy. These include:
Slowing down on the highways. Driving at 55 mph instead of 65 mph can reduce fuel consumption by 20 percent or more.
Avoiding stop-and-go driving. Accelerating and braking cause your engine to expend more fuel. If you can't avoid driving in the city, accelerate slowly.
Getting rid of “junk in the trunk.” An extra 100 pounds of weight can reduce your fuel economy by 2 percent.  

Maintaining your vehicle regularly. Keep your tires inflated, get a regular tune-up and use the correct grade of motor oil.

Another way to offset high gas prices is to save money on car insurance. Shop and compare car insurance quotes for free with InsWeb—doing so could save you hundreds each year.

Gas prices

  

Gas prices are like the weather: All the complaining in the world isn’t going to change anything.


And while weather happens because of myriad complex factors than even scientists don’t fully understand, the dynamics behind the rise and fall of oil and gasoline prices is nearly as mysterious and also due to a whole range of influences.

Why, for instance, do gas station prices shoot up almost instantly when the price oil inches up, but take their time moving in the other direction when oil gets cheaper? Blame free enterprise, says Patrick DeHaan, senior petroleum analyst for the Minnesota-based industry pump watchdog GasBuddy.

The price of a barrel of crude, which peaked in late April at nearly $114, had dropped to just under $100 as of Friday afternoon, though gasoline dealer marquees until recently have been slow to reflect the change.

Prices are finally beginning to drop, however. The least expensive gallon of regular gas to be found in Brownsville on Friday, according to the GasBuddy website, was $3.68 at the Sam’s Club on South Jackson Road. The Friday average for the Rio Grande Valley was $3.78, according to GasBuddy. The week before it was $3.87. This doesn’t change the fact that gas prices are “very quick to go up and very slow to go down,” DeHaan said.

The reason retailers raise their prices at the first hint of higher oil futures is, no surprise, to help offset the higher cost of the next load of gas they buy — and in some cases raise cash to buy that next load. Retailers aren’t in a hurry to lower their prices when oil goes down because, no surprise, they want to wring a few more dollars out of the spike as long as possible. From February until last week, prices were rising fast and stations were making little if any money, DeHaan said. Now, with cheaper oil pulling down gas prices, a brief window of opportunity has opened.

“When the price is falling, stations use that time to recoup any losses and make some money,” he said. “It’s been standard business practice for decades.”

While it’s easy to blame station owners for the fact that it costs $100 to fill up your Escalade, higher fuel prices aren’t their idea, DeHaan said.

“Station owners hate high gas prices just as much if not more than motorists,” he said. “Not only do they have to deal with motorists’ frustration, but percentage-based credit card fees go up and they make even less. Ninety-five to a hundred percent of station owners would say they’d rather have prices stay closer to $2 a gallon.”

While it would be fine with most drivers if retailers lost money on gas sales, it would mean fewer stations, fewer jobs and less competition, which would lead to even higher gas prices, DeHaan said. If not retailers, then, who’s to blame for the current situation?

It depends on when you ask. In February it was the fighting in Libya and fears it would spread to other Mideast countries. In March it was the weakening dollar. Later in March, and through April and May, it was because refineries — some of which were off line for maintenance — were producing less gas and the supply was dwindling. Traders eventually noticed, panicked and prices took off.

The last couple of weeks have seen the panic begin to recede, and gas prices are gradually following suit. A stronger dollar is one reason, along with lessening likelihood Louisiana refineries along the rain-swollen Mississippi River will have to be shut down, as a result of the Army Corps of Engineers decision to open a major spillway and redirect the flooding.

DeHaan said much has been made of a drop in demand for gasoline, though in reality demand has decrease only 1 or 2 percent — not enough to make much of a difference in prices.

“Basically this is a tug of war,” he said. “For February, March and April the tug was easily being won by high prices,” DeHaan said. “Nine out of ten factors were pressuring crude oil prices higher. Now there many more things pulling prices down.”

In January, DeHaan was quoted in an Ohio newspaper predicting gas prices would peak in May, and he appears to have been right. He expects the national average to drop another 10 cents by Memorial Day. After that, he anticipates a “roller coaster summer,” with prices dropping in June and July and going up again as we get more into the Atlantic hurricane season. In October and November prices should start dropping again. This is all if nothing unforeseen happens.

As for the volatility of oil and gasoline markets, DeHaan places much of the blame on advances in technology over the past several years or so that make it possible for anyone with enough money to get into the speculation game, which in turn has led to unprecedented fluctuations in market prices.

He thinks traders who speculate in oil should be required to take delivery of the physical commodity as opposed to just buying and selling it on paper. The Federal Trade Commission has looked at the situation but is dragging its feet on action despite congressional prodding, DeHaan said.

“High gas prices in 2008 certain helped the economy to go into recession,” he said. “Why are we taking the risk of allowing speculators to flood the market and drive prices up again? We risk driving the economy again into a recession.”
 

Gas prices rising

WASHINGTON (NBC) - With gas prices spiking, Washington is facing mounting political pressure to do something. That may include tapping America's strategic oil reserve to help bring down prices.

White House Chief of Staff William Daley says, "We are looking at the options. The issue of the reserves is one we are considering. It is something that only is done, and has been done, in very rare occasions."

Gas prices now topping four dollars in some areas. We've all seen the cause: the unrest and upheaval rippling through Libya and the Middle East.

We're all feeling the effects, that sudden surge at the pumps, threatening to increase the cost of everything from food to air travel.

That's bad news for the economy.

The last time gas prices spiked like this, the answer of drilling seemed simple. However, even drilling proponents realize energy is a long-term problem.

Senator Lamar Alexander, (R) from Tennessee says, "I'm buying an electric car, and that's going to give me the patriotic pleasure of plugging in, and not sending money overseas to people trying to blow us up."

Rising prices and anxiety go far beyond the pumps.

The latest Lundberg survey shows that average national gas price jumped more than 32 cents a gallon.

That's the second biggest leap in history, just behind the spike that followed hurricane Katrina.

Rising oil and gas prices

Gas prices increased for 44 straight days until Friday, when they dipped after oil posted its biggest one-day percentage decline in two years.

That might be enough to stave off $4-a-gallon gas for a while in Southwest Florida, but drivers may still see prices hit that dreaded mark.

Local gas prices have increased more than $1 per gallon in the past year — 21 cents over the month — and some wonder if $4 gas may be inevitable once the summer driving season launches on the Memorial Day weekend.

"If the downward trend in oil prices continues, it could keep the Florida average at bay, around the $3.93-$3.95 marker, and push off that $4 average for a couple of weeks," said Jessica Brady, a spokeswoman with AAA Auto Club South.

Other analysts believe gas has peaked ahead of summer and could retreat to around $3.50 per gallon by June.

The price for regular grade gas averaged $3.94 per gallon Friday in the Bradenton-Sarasota-Venice market, up from $3.73 a month ago and $2.92 last year, AAA reported. Premium has jumped to $4.20, 22 cents more than last month and 97 cents above last year.

Florida's average for regular, the most common grade purchased, was $3.94 per gallon. The U.S. average was $3.98, down a tenth of a cent from the day before.

The price of gas rose every day since March 23 as oil prices soared because of the falling dollar, the Libyan rebellion and oil refinery problems. Seven U.S. refineries shut down last week because of severe weather and power outages.

Prices also typically rise during spring as refineries switch to summer blends, which cost more to produce.

A growing set of market analysts are beginning to suspect oil futures may be over bought, setting the table for an abrupt price correction if the bubble bursts from a more certain supply.

Key events impacting oil prices this week include earnings reports that will provide insight into the state of the U.S. economy, a press conference by Federal Reserve Chairman Ben Bernanke, and continued developments in the oil-producing Middle East and Northern African regions.

The weekly Department of Energy report showed a draw down in domestic crude oil stocks and a ninth consecutive week of decline in the domestic gasoline inventory. Draw downs are not unusual this time of year as suppliers lower stocks leading up to the change-over from winter to summer-blend gasoline.

Nine states have averages for regular unleaded at or above $4 a gallon. Hawaii is most expensive at $4.54 and Wyoming has the cheapest gas at $3.56.

Gas prices rising

Usually, gas prices go up leading up to a holiday. That trend seems to be working in reverse, as gas prices have gone up more than 10-cents a gallon since July fourth.



 

A trip from Port Charlotte to watch a soccer game cost Cristiano Oliveira $75.

"It's $3.65. It's crazy," he said. "It's getting to the point we've got to get the bicycles out next," he said.

Perhaps the soccer trip would have cost less at the start of the month.

The statewide average is up 14-cents since July fourth, up now to $3.64 for a gallon of regular unleaded.

Southwest Florida is still below national and state averages.

"Unfortunately, I think we're all kind of getting used to it," said David Pojero, with AAA.

AAA projected holiday travel was up this year, but other indicators show gas consumption in the U.S. has steadily gone down in recent months.

"I try not to go too many places since the gas went up," said Fort Myers driver George Giles.

So, why would prices go up if Americans are driving less?

Experts say it's all about world demand. Places like China, India, and Latin America are apparently all using fuel at record rates.

But according to AAA, relief from rising prices could come soon because demand was not as high as expected.

For now, they suggest drivers do what Tim Shrader does on a regular basis. Tire inflation and oil changes - if done regularly - can add 10-percent more to your miles per gallon.

"[If] you do all that basic maintenance stuff, you'd be amazed how much gas you can actually save yourself," said Pojero.

Unfortunately, experts say a return to last year's prices as low as $2.75 seems unlikely.

What Do Gas Price Increases Really Mean to the Economy as A Whole

The national average for a gallon of gas is now hovering well over $4.00 per gallon and expected to reach as high as $5.00. With summer just around the corner, cash strapped families are reconsidering summer vacation plans – or have they already? Around the country, popular tourist destinations are already taking a hit.

According to a host of contributors to an Associated Press feature on Friday, “there are already signs that eye-popping gas prices are changing Americans’ behavior.”

Here are some interesting things to consider.

Only 37,000 people visited Mount Rushmore in March, down from 43,000 a year ago.

Along the Rhode Island coast, a favorite for scenic drivers, roadside businesses are down as much as 30-percent since early March.

Travel destinations do keep a close watch on gas prices and do their best to react. Some destinations are offering gas cards or discounts on rooms and services, but with gas prices high, there is still little room for extra spending. Carl Whitehall, of the Convention and Visitors Bureau in Gettysburg, PA, says, “While we still think millions of people will come to Gettysburg, they may not buy as many souvenirs or go to as many attractions as they hoped.”

Especially if gas climbs to $5.00 a gallon, the roadside restaurants, hotels, souvenir shops, attractions and regional points-of-interest will suffer dramatically this summer.

Do you remember the two-percent cut in the social security payroll tax that kicked in January first and was designed to give American families some extra disposable income? Those extra funds are now going right into your gas tank.

The airlines are also getting hit with high gas prices, which they inevitably have to pass along to the consumers.

Diesel fuel prices are up over a dollar from last year, which means increased shipping costs on everything that doesn’t move by train.

The bottom line on sustained gas prices hovering around $5.00 is it’s an economy killer. If people are paying an extra dollar or two for gas, they will be forced to stop discretionary spending on items now starting to make a slight come-back, potentially putting us back into the throws of a recession.

So, why are gas prices so high? This is what you really can do all by yourself to make an impact on demand. However, you will have to leave your comfort zone. There was a time not so long ago that driving an automobile required more than just turning a key and going. You had to adjust the choke for instance. You didn't have cruise. You had to check the oil every week. You had to change your own flat.

What does that have to do with high gas prices? Just trying to get you prepared for how you can save 30% to 80% on the fuel your car uses. You can wait for alternative energy cars that are mass produced in 15 to 30 years, and keep paying ridiculous prices for gas, or you can do something NOW.

Alternative energy is not new. The world has been using power from nature since time began. Think sailboat, water mill, wind mill, hot springs, wood, whale blubber, oil, horses, oxen, and fire. As a means of transportation these all leave something to be desired, especially when you already own a car.

It is now possible to burn hydrogen gas obtained from water, on an as needed basis, mix it with gasoline, ignite it in your engine, and increase your efficiency. You can build a device from common materials for under $60 that will accomplish this. It will take you an afternoon with simple tools to build, and under an hour to install it. The rub is, you will have to maintain it, which will probably take up to 30 minutes per month. Are you willing to give up your time to save $1 to $1.50 on every gallon of gas you buy?

Why are gas prices so high? They don't have to be.