Daily Fuel Economy Tip

Another Day, Another Record For Gas Prices

At some point, gasoline prices will stop rising. Right?

For the 16th consecutive day, the national average price for a gallon of regular unleaded gasoline has closed at a higher price than the previous day.

The national average gas price is now up to $3.88 per gallon, which is roughly 10% higher than a month ago, 20% higher than exactly one year ago, and 26% higher than the national average price on January 1, 2008. And we still haven’t started the summer travel season!

Currently, there are nine states reporting average gas prices in excess of $4 per gallon, with Alaska leading the way at $4.27 per gallon. Wyoming has the nation’s lowest state-wide average price at $3.63 per gallon.

Not to be outdone, the price of a barrel of crude oil touched another record high today in crossing the $135 mark for the first time before finishing the day at $130.81, down slightly from yesterday’s closing price. Since May 1, the price of crude oil has risen nearly 20%, and is up over 30% since the beginning of the year. However, according to many prominent analysts and economists, this may just be the beginning of a prolonged bull market for oil.

One such analyst is Goldman Sachs’ Arjun Murti, who recently reaffirmed his belief that oil will hit $200 a barrel during the next six to 24 months. Considering Murti was one of the first analysts to predict $100 oil - and we’re already nearly two-thirds of the way to $200 - I think it’s safe to say that, unfortunately, Murti’s probably going to be correct.

So, what would a spike in oil prices mean for gas prices? If you go based on an article posted on CNN Money, we could be looking at the very real possibility of $6 gas. The article’s prime example of something that would cause a spike in oil and gas prices was an active/destructive hurricane season. Essentially, the margin between supply and demand is so tight right now that any prolonged disruption in supply - say, a category five hurricane damaging refineries throughout the southeast - would cause gas prices to hit $5 or $6 per gallon, at minimum.

Long story short, it’s probably going to get a lot worse from here on out.

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Posted in Oil Prices | 1 Comment »

How People Are Offsetting High Gas Prices

As gasoline prices continue to set record highs with each passing day - now nearing a nation-wide average of $4 per gallon, up nearly 30% in 2008 - more and more Americans are beginning to see a significant hit to their budget’s bottom line.

With little relief (if any) in sight, many Americans have started to make adjustments to help ease the sting of high fuel costs.  Many drivers have made minor adjustments that have caused minimal lifestyle changes - such as reducing highway speeds - while others have had to make much more significant and life altering changes - such as take a job closer to home.

In order to gauge how most Americans are coping with higher gasoline prices, I recently included a poll on Daily Fuel Economy Tip which, very simply, asked the following: “What is the biggest thing you have done to try and combat high gas prices?”  Here’s how nearly 200 people responded:

• 33% stated they are driving less and/or using mass transportation more
• 25% stated they are working harder to maximize their current vehicle’s fuel economy
• 13% stated they’ve done nothing
• 12% stated they’ve bought a car that has better fuel economy
• 9% stated they’ve moved closer to work or taken a job closer to home
• 8% stated they’ve done something not mentioned in the poll’s list

Based on the above results, nearly 9 out of 10 people have attempted something in order to try and offset record high gasoline prices.

In the end, hopefully there will be some good to come out of $4 (or $5, $6, etc.) gasoline. 

Whether it forces us to reduce our driving, shift towards smaller cars with better fuel economy, force the Federal, state and local governments to offer better public transportation, etc., it’s clear that expensive gas is going to force significant changes throughout America.

While it may hurt (a lot) now, in the end chances are pretty good we’ll be better off in the long haul.

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Posted in Drive Less, Driving Habits, Fuel Efficient Vehicles | 4 Comments »

Connecticut is First $4 Gas State

For the first time in history, America has a state with an average gasoline price above $4 per gallon. To the surprise of many, the first state to $4 wasn’t California, or even another West Coast state - instead, the dubious honor of being the first state with $4 gas goes to Connecticut.

According to state-wide figures posted on GasBuddy.com, Connecticut first crossed the $4.00 threshold shortly before noon this morning. Since then, the price has fallen back to $3.99 a gallon. For basis of comparison, Wyoming currently has the nation’s lowest state-wide average price at $3.48 per gallon.

Based on the recent spike in oil prices (up 8% last week) and the subsequent jump in gas prices, it appears as if the rest of the country won’t be too far behind Connecticut in crossing the $4 mark. Currently, the national average gas price is up to $3.73 a gallon, which is 64 cents - or 21% - higher than at the same point last year, and there are now ten states reporting prices in excess of $3.80.

For as bad as things may look right now, there’s a slight possibility that gas prices may not climb too much higher than current levels, due in large part to the strengthening of the dollar.

For those of you who don’t know, most commodities (oil included) are priced in U.S. dollars. Over the last year or so - and particularly the last six months - the value of the dollar in comparison to other currencies has fallen rather swiftly. In order to maintain a steady value, these dollar based commodities had to command a more dollars.

Throw in much higher worldwide demand - which would drive up the price regardless of the strength of the dollar - and it’s easy to see why the price of oil is up nearly twofold over the last year. In turn, this has pushed our gasoline prices to the record highs we experience with each passing day.

Unfortunately, since the increased demand isn’t going to go away without a catastrophic worldwide economic collapse, it looks like our only hope significantly lower oil and gasoline prices is a significantly stronger dollar. While it’s tough to envision a scenario where the dollar completely rebounds, it’s not out of the question for the dollar to have already bottomed out.

Considering the fact that the Federal Reserve is likely done cutting interest rates - and may be forced to begin raising rates should inflation get much worse - and our counterparts across the pond have yet to start cutting - something many economists are predicting will happen in the second half of 2008 - it appears as if the stage is set for the dollar to begin to gather some positive momentum.

Hopefully, in turn, this will lead to lower commodity and gasoline prices.

But… I wouldn’t start holding my breath just yet!

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Posted in Oil Prices | 6 Comments »

Out of Oil? Welcome to the Brave New World.

Unless you’ve been able to avoid the news for the last two years, you’re probably well aware of the fact that the price of crude oil has been on a strong and steady climb.

While there are some economists who claim that the major factors behind the dramatic increase in price are a weak dollar and out of control commodity traders, a vast majority of economists, ecologists and every day people are worried that the real answer is much simpler: we can’t produce enough oil to meet current demand and we’re quickly draining what supplies we have left.

Thanks to the industrialization of the two most populated countries in the world - China and India - the world-wide demand for oil and petroleum based products has soared over the past decade. Unfortunately, since oil is a finite commodity (there’s only so much left in the world, not to mention the fact that there isn’t much, if any, excess refining capacity) this increased demand has done two distinct things:

1. Driven the price of oil up nearly 75% in the last year alone
2. Drastically reduced the amount of the world’s remaining supply of oil

While I’m sure there are plenty of very educated people out there who have a pretty good idea how much oil is left, it seems that considering the wide range of time frames being given, it seems that even most people “in the know” are just guessing. So, I figured why not give Daily Fuel Economy Tip readers a chance to guess as well?!?

About a week ago I put up a poll which asked: “When do you think the world will run out of oil?” Well over 200 people responded, and this is what they had to say:

• 38% said we will run out of oil in more than 100 years
• 23% said we will run out of oil in less than 25 years
• 18% said we will run out of oil in 26 to 50 years
• 13% said we will run out of oil in 51 to 75 years
• 8% said we will run out of oil in 76 to 100 years

It certainly seems like there’s a pretty good split between those who think we have some time (38% for 100 + years) and those of us who think time is running out (41% for less than 50 years). It seems us common folk can do about as good of a job predicting future oil supplies as the so called “experts.”

Unfortunately, since most of the world’s expansion over the last 50 years can be directly attributed to cheap energy (specifically cheap oil) it really does feel as if we are on the cusp of a Brave New World. Will we experience hyper-inflation on everything from fuel to food? Will things like transcontinental flights be a thing of the past? Will we begin to see a gradual decrease in the world’s population?

I know that many of these questions seem rather absurd, especially when they’re looked at in the context of “the here and now.” However, when taking the long-term view, it’s actually very easy to see the world coming to a grinding halt thanks to a significant decline in the availability of oil. The reason being, less oil will have an enormous trickle-down effect.

Just look at the following examples of what could happen due to higher oil prices:

• Obviously, the price of most forms of energy will go through the roof. The price of all transportation fuels will skyrocket. In order to help combat these increased costs, people will become more urbanized and things like the suburbs will become a thing of the past.
• High transportation costs will cause a dramatic trickle-down effect on consumer prices as manufacturers have no choice to pass on the costs to their customers. No consumer product will be safe.
• Any petroleum based product (plastic anyone?) will undergo significant price increases. Do yourself a favor and try and pick out even one item near you that neither contains plastic nor was produced by anything containing plastic.
• As oil prices increase, there will be greater emphasis placed on bringing alternative fuels to the market. Right now, it appears our main efforts are being focused on ethanol. As farmers focus more of their efforts on producing ethanol producing plants, the price of these plants, as well as the prices of every other fruit/vegetable/dairy/poultry/beef/pork product will climb exponentially higher.

These likely scenarios just scratch the surface, and don’t even begin to speak to the increased conflict over the world’s remaining oil supplies.

But, so I don’t end this post on such a gloom and doom note, it does appear that there is reason to be thankful for the recent run of gasoline and oil prices, as there now appears to be much more focus on finding cheap, clean and sustainable alternative fuel sources.  As these fuels/energies become more mainstream, hopefully they will reduce our demand for oil to the point that we don’t even care how much petroleum is left in the earth.

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Posted in Oil Prices | 15 Comments »

Gas Above $3.50, Oil Nears $120

The price of oil and gasoline continue to hit record highs with each passing day and, unfortunately, it doesn’t appear as if there is any possibility of relief in the near future.

Today, the price of a barrel of crude oil closed at nearly $120, while the price of a gallon of regular unleaded gasoline climbed over to over $3.53.

At this point last year, the national average price for a gallon of regular unleaded gasoline was at $2.86, or roughly 19% less than today’s average. Even last month, the national average price was “only” $3.25 a gallon, or roughly 8% less.

According to GasBuddy.com, New Jersey currently has the lowest state-wide average price for a gallon of regular unleaded gasoline at $3.33, while California is reporting the highest state-wide average price at nearly $3.88 a gallon. At this rate, it should only be a matter of days before we have the first $4 a gallon state-wide average gasoline price.

Obviously, this isn’t exactly the world’s greatest news, especially considering the current state of our economy. So, since may of us are trying to figure out where gas prices are going to go from here. According to many pundits, we will apparently avoid $4 gas this summer, however, I don’t buy it.

In order to try and prove this people wrong, I used some historical data and some simple logic to see if we will in fact avoid the dreaded $4 gas scenario. Essentially, I took a look at where we were at this point last year - $2.86 a gallon - and compared that number to where gas prices topped out last summer - $3.24 a gallon. In turn, by doing some simple math, I figured that gas prices jumped over 14% during that period.

Assuming the same were to happen this summer (and even this may be wishful thinking), we should expect gasoline prices to hit no less than $3.99 this summer.

I realize this is a very simplistic look at where prices may end up, but I think it does go to show that it’s not going to take much to get us to that $4 barrier. And considering we’ve never gotten back below the $2 barrier, we should probably come to the realization that, at the very least, $3 gas is here for good.

Regardless, all signs are clearly pointing to a very expensive summer vacation season, so hopefully you’ve been practicing your gas saving driving habits!

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Posted in Miscellaneous, Oil Prices | 3 Comments »