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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