$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.

Comments

  1. Gas is already $3.70ish a gallon and will be $4 before summer hits. It’ll probably be $4.50 a gallon by mid to late summer and then it’ll start going down so that by Thanks giving it’ll be back down to about $3.90 or so a gallon. By next summer we’re going to see $5 a gallon.

Trackbacks

  1. […] $5 Gas on the Horizon? 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 … […]

  2. 1 in 3 Americans Think $5 Gas is Likely in 2008 | politikly.com

    \r\nThankfully you never forget how to ride a bike.\r\nIf you look at historical gas price charts, y

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