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!

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.

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!

Who Do We Blame for High Gasoline Prices?

As gasoline prices have increased over the last several years – for example, right now gas prices are 19% higher than what they were one year ago – many Americans have searched high and low to pinpoint who or what is to blame.

Is it the evil empire of Big Oil? The Bush Administration and their policies? The growing economies of China and India? Something else? All of the above?

Obviously, this isn’t a clear cut issue, and there isn’t one thing in particular to blame. This is a very complex and integrated problem with plenty of moving parts. However, it’s very likely that there’s one reason that’s more at fault than any of the others.

With that in mind, I wanted to see who or what we blame the most for the run of record gasoline prices. To see what people thought, I recently had a poll up on Daily Fuel Economy Tip which asked: “Who/what do you blame most for record high gasoline prices?” Here’s how people responded:

  • 41% blame the Bush Administration
  • 17% blame “Big Oil”
  • 15% blame supply and demand
  • 13% blame commodity traders
  • 6% blame OPEC
  • 5% blame China/India
  • 3% blame “other”

While I expected a lot people to blame the Bush Administration, I really had no idea it would be nearly half of the nearly 200 respondents. Maybe it’s their disenchantment with the administration’s policies, the current economic situation, the fact that Bush was an “oil man” and still has ties to the industry, or a combination of these and other factors.

While I think these are mostly circumstantial arguments, I guess when you combine everything together, it may provide a somewhat compelling argument. Unfortunately, I don’t buy it. (For the record, I would consider myself a moderate that leans towards the liberal side. Whatever that means.)

Not to discount nearly half of the respondents, but I generally it very hard to believe that the current administration is behind this. Why would the President of the United States deliberately direct policy that is clearly harmful to the U.S. and world wide economies? I can understand being unhappy with current administration, but blaming them for record high gasoline prices seems to be a pretty big stretch.

I think the people who blame supply and demand as the major factor behind the rise in gasoline prices are probably much closer to the actual answer. Over the last several years, as developing nations have become more industrialized, demand for petroleum and petroleum based products (such as gasoline) has increased dramatically. Because there’s only so much oil to go around, and because of a significant decrease in refinery output due to razor thin profit margins, simple economic theory has to take over:

As demand for a product increases while supply of the product decreases, the price will naturally trend upwards.

Maybe I’m just completely naive and the conspiracy theorists are correct, but I just have a very difficult time getting my head around the idea that this is more than a basic economic issue.

$5 Gas on the Horizon?

Many Americans are justifiably worried that the price of gasoline will soon hit $4 a gallon. With gas prices seemingly setting new record highs each day – and we’re still only in March – it appears as if $4 gas this summer is pretty much a foregone conclusion.

Is it possible that we’re targeting the wrong number and we shouldn’t be worried about $4 gas this summer, rather we should be even more concerned about $5 gasoline?

According to some $5 gas isn’t just a possibility, it could actually be likely.

Over the last six months (October – March), the price of a gallon of regular unleaded gasoline has jumped from roughly $2.75 a gallon to slightly over $3.25 a gallon, which equates to an 18% increase. Traditionally, during this October through March time frame, gasoline prices tend to decline.

If you look at historical gas price charts, you’ll see that the big run up in summer gasoline prices tends to begin to occur in the late winter/early spring and will usually last throughout the summer months. For example, during 2007’s gas price run up, the national average gas price jumped from $2.15 in January to $3.24 in May. So, if we were to see a similar 50% price jump during 2008, we’d not only cruise past $4 a gallon, but in some parts of the country (particularly places like California and Hawaii) there would stand a pretty good chance that $5 gas would be the norm.

A few weeks ago I asked readers whether or not they felt $4 gas was likely this year; over 75% of respondents said it was at least likely, if not a foregone conclusion that we would hit the $4 mark. Because the response was so overwhelming, I wanted to see how many people felt things could get even worse.

For the last week I’ve had a poll up which asked: “Will we have $5 gas in 2008?” Here’s how people answered:

  • 10% of respondents said there is a 100% chance we’ll have $5 gas in 2008
  • 21% of respondents said it is likely we’ll have $5 gas in 2008
  • 25% of respondents said there is a 50/50 chance we’ll have $5 gas in 2008
  • 31% of respondents said it is doubtful we’ll have $5 gas in 2008
  • 13% of respondents said there is a 0% chance we’ll have $5 gas in 2008

Considering it would take a price increase of $1.75 a gallon from current prices to hit $5, I was very surprised that nearly one in three respondents said it is at least likely we’ll have $5 gas this year. However, because we’ve had pretty significant price jumps the past three springs, $5 gas certainly isn’t out of the realm of possibility.

One thing that might decrease the possibility of $5 gas is the fact that even at current levels, many Americans are reporting that they’ve had to decrease the amount of driving they do. Thanks to a slowing job market, falling home equity and grocery price increases, the average American consumer is really starting to feel the squeeze.

As prices for gas and food continue to increase, while wages and other income sources fall or remain stagnant, in theory more and more people will choose to drive less. This decrease in demand should help as a stabilizing force to keep gasoline prices from shooting through the roof.

In the meantime, let’s hope that car manufacturers push more fuel efficient vehicles to the market while continuing their efforts to develop a fleet of vehicles that run on a clean, renewable and cheap fuel source.

Gas Prices Hit All-Time Record High

Gas prices hit an all-time high of $3.25 today, breaking the previous record of $3.24 set in May of last summer. To help put this in some perspective, exactly one year ago the national average gas price was $2.56. For you non-math people out there, that constitutes a jump of over 25 percent.

In addition to the nation-wide record, every state is now reporting state-wide average gas prices above $3 per gallon. New Jersey has the lowest average price at $3.01 per gallon, while Hawaii has the highest average price at $3.68 per gallon.

Unfortunately, it doesn’t appear as if things are going to get much better any time soon. The price of oil, which is a major factor in how much we pay at the pump, has skyrocketed over the last several months and shows no signs of stopping any time soon. In fact, Goldman Sachs is now warning of $200 oil.

Additionally, we’re right around the time of year where refineries will switch over to “summer blend” gasoline, which is more expensive than regular gas. Summer blend gasoline (something that has essentially become Federally mandated) contains special (read: more expensive) additives that help reduce emissions and decrease smog.

Unfortunately, as I’ve said on several occasions, this couldn’t be coming at a worse time for most Americans. The housing market, which is the single greatest source of wealth for Americans, is in the midst of a prolonged down cycle, which isn’t likely to end until next year at the earliest. Consumer confidence is plunging, the dollar is tanking, jobs are becoming less abundant, food is becoming more expensive… I think you get the point.

As long as the current economic trends continue – which is very likely considering most signs are pointing to things getting much worse – gasoline prices above $3 a gallon are really going to hurt American consumers. If gas hits $4 this summer, look out below!

Hopefully higher gas prices will encourage us to do a better job conserving fuel and force us to navigate towards more environmentally friendly vehicles and energy sources. While these may be the only bright spots in paying more money for gasoline, in the end today’s pain may be worth it if it truly is the catalyst that helps us get our act together.

$4 Gas in 2008 – Over 75% Believe It is Likely

This past summer, as gas prices were hitting an all-time record of $3.24 per gallon, many of us (myself included) wondered if things really could get any worse. After all, over the past four years, gas prices had risen nearly 80 percent, so the madness had to stop at some point right?

Unfortunately, it seems as if our questions have been answered, and it appears that things are going to continue to get worse.

As of this afternoon, the national average price for a gallon of regular unleaded gasoline stood at $3.16 per gallon – only nine cents away from breaking the all-time record. That $3.16 is also 26% higher than what we were paying exactly one year ago. There are only three states that are currently reporting state-wide average gas prices below $3 per gallon, the lowest of which (Wyoming) has an average gas price of $2.94.

Keep in mind, we’ve just entered March.

So, where are we going to go from here?

I recently added a poll to Daily Fuel Economy Tip which asked: “Now that oil has closed above $100/barrel, how convinced are you that at some point in 2008, you will pay $4 for a gallon of gas?” Not surprisingly, the responses overwhelmingly showed that most of us believe $4 gasoline is a foregone conclusion:

  • 51% of respondents stated they were 100% certain they will pay $4 for gas in 2008
  • 31% of respondents stated it is likely they will pay $4 for gas in 2008
  • 7% of respondents said there is a 50/50 chance they will pay $4 for gas in 2008
  • 4% of respondents said it is doubtful they will pay $4 for gas in 2008
  • 7% of respondents said they will not pay $4 for gas in 2008

With the economy slowing (yes, we’re in a recession – I don’t care about the rule of thumb) and inflation becoming more of a concern, $4 gas certainly couldn’t be coming at a worse time. The only likely benefits of $4 gas is the fact that there should now be more of a push towards fuel conservation, as well as a greater incentive to get alternative fuel vehicles out to the masses much more quickly.

In the meantime, it’s probably not a bad idea to get reacquainted with some gas saving tips.

Higher Gas Prices Beginning to Affect Lifestyle

Unless you’ve been living in a cave, or have been able to function without the use of a personal vehicle, you’re well aware that the cost of gasoline has skyrocketed over the last couple of years, and is beginning to take a significant bite out of many people’s “discretionary” spending money.

Over the past two years, the national average price of a gallon of regular unleaded gasoline has jumped from $2.40 to $3.07. While this 67 cent increase may not seem to hurt you too much when you fill up, over the course of a year, that seemingly insignificant price increase can add up to a lot of lost money.

For example, let’s say that you fill up your 12 gallon car once every week. That 67 cent per gallon increase will cost you an extra $8.04 per week, or an extra $418.08 per year. Obviously, the more you have to fill up or the worse gas mileage you get, the more money you’re going to have to spend, but I think you get the general idea.

If you’re making tons of money, that extra cost is likely to be lost in the noise. However, if you’re not making a lot of money and are already scraping just to get by, that unexpectedly higher gasoline cost could be enough to drastically change your spending habits.

To find out more on how others are being affected, I recently added a poll to Daily Fuel Economy Tip which asked: “Have you noticed a change in your lifestyle due to higher gasoline prices?” Based on the 112 responses, here’s how people answered:

  • 36% of people said that they have had to significantly reduce spending in other areas of their lives due to higher gas prices
  • 32% of people said that they have not had to reduce spending or change their lifestyle
  • 29% of people said that they have reduced spending, but haven’t made significant lifestyle changes
  • 3% were unsure how higher gasoline prices have affected their lifestyle and spending habits

With oil having closed above $100 per barrel for the first time, gasoline prices are likely to continue to climb for at least the near future (hitting the $4 mark?), and unless something unforeseen happens, probably won’t begin to drop until early in the fall of 2008.

Unfortunately, this probably means that more and more of us will begin to feel the squeeze, reduce our spending elsewhere, and push an already feeble economy deeper and deeper into a recession.

$100 Oil = Continued Pain At The Pump

It’s finally happened; the price of a barrel of crude oil topped the $100 mark for the first time in history. While it was still able to close the trading day below $100, it’s likely only a matter of days before crude oil closes in triple digits.

Unfortunately, it doesn’t appear that there’s going to be any end to this run up any time soon; OPEC has announced that it might not be able to meet its production quota in the future due to rising world demand, U.S. inventories continue to fall and the transition to other energy sources can be described as moving at a glacial pace, at best. All of this equates to continued upward pressure on the price of crude oil.

In turn, this means we’re going to continue to see higher and higher gasoline prices.

In the past week, the average price of gasoline has jumped over eight cents, and now stands at $3.10 per gallon. In contrast, the average price per gallon was a little over $2.30 one year ago. According to GasBuddy, 40 states are reporting state-wide average gasoline prices above $3. Of the remaining ten states, only four are reporting an average gas price below $2.95.

It now appears that the once unfathomable thought of having to pay $4 for gasoline is now becoming more and more likely.  The real kicker though is the fact that higher gas prices couldn’t be coming at a worse time for the American consumer.

There is no doubt that the American economy has slowed drastically over the last several months, and I think it would be very easy to argue that we have entered into a recessionary period.  Job growth has slowed, unemployment is up and consumers are spending less.  All of these are very clear indicators of a recession.

If gasoline prices continue to rise, this is going to eat into the discretionary funds that Americans used to spend on things like cars, electronics, home improvements, etc.  If this spending dries up, businesses will have to pull back their spending as well, leading to slow growth, less job creation and more job terminations.

Long story short, reduced consumer spending creates a very pronounced downward spiral in the economy.

I realize that there is some value to higher gasoline prices, namely the backlash from the consumer may push car makers to offer more fuel efficient vehicles and force the energy companies to bring alternative fuels to the forefront.  Unfortunately, these are likely to be long-term gains.

In the short term, in our current economic state, higher gasoline prices could be absolutely disastrous.

Sub-$3 Gas, We Hardly Knew You

So much for the national average price of gasoline being able to stay under $3 for an extended period of time.

Thanks to another run-up in the price of crude oil, as well as an unexpectedly high decrease in the U.S.’s gasoline inventories, the national average price for a gallon of regular unleaded gasoline has jumped to $3.05, nearly seven cents higher than a week ago. Last year at this time, the gasoline was at $2.32 per gallon.

Colorado is reporting the lowest state-wide average gasoline price at $2.80, while Hawaii is reporting the highest state-wide average gasoline price at $3.55.

As the price of crude oil began to fall in December (dropping nearly 12% from its peak) there was increased hope that there would be a nearly equal drop in the price of gasoline. Unfortunately, as the price of gasoline began to ease, it’s descent was slowed, and ultimately reversed, by a rebound in crude oil.

Unfortunately, we should probably get used to more frequent ebbs and flows in gasoline prices, thanks to the fairly strong “Catch 22” relationship between the United States’ economy and the price of crude oil.

What I mean by this is as the price of crude oil goes up, there is fear of economic slow down in the U.S., which would likely cause us to have a lower demand for oil. In turn, this causes the price of crude oil to fall. But, as crude oil falls, the threat to the U.S. economy is lessened, which subsequently causes the price of crude oil to slowly tick upwards.

Granted, this is a pretty simplistic view, especially considering there are many other factors behind the price of crude oil. That being said, considering the United States still has the world’s largest economy (thus is still the largest consumer of oil), the U.S. economy is one of the main driving factors behind the price of crude oil.

Long story short, get ready for more of the same.

Happy New Year.

SEO Powered By SEOPressor