Gas Prices Spike, Sign of Things to Come?

Over the past five days, the national average price of a gallon of regular unleaded gasoline has climbed more than 11 cents, to just over $1.75 per gallon.  The last time the price of gas was this “expensive” was back on December 3.

Although, compared to last summer, I think most of us are willing to live with this relatively mundane price increase.

Most, if not all of the jump in gas prices can be contributed to the fact that the price of oil had climbed from the low $30s just a few weeks ago, to yesterday’s closing price of just under $50 per barrel.

However, today the price of oil fell over 12% to under $43 per barrel thanks to a government report showed a larger than expected increase in crude inventories.

Currently, every state but Alaska ($2.38) and Hawaii ($2.32) is reporting an average gas price below $2 per gallon.  Wyoming has the lowest state-wide average gas price at $1.36 per gallon.

So, where do we go from here?  As you read in my last post, nobody — even the experts — seem to know for sure, but from the looks of it, it would be surprising if this upward trend were to continue.

Unfortunately, more and more bad economic news continues to come out, the latest being word that the Federal Reserve expects the U.S. GDP to contract through 2009 and unemployment to rise “significantly” into 2010.  Obviously, the worse the economy performs, the less oil the U.S. and the rest of the world will need, which will cause downward pressure on oil prices.

However, OPEC and other oil producing countries will likely step in and cut production again if it appears oil prices will resume their nearly six month free fall.  In turn, this will help prop up prices until the world-wide economy can gain some traction.

Long story short, this leads me to believe that the national average gas price will likely be stuck in the $1.60 to $1.75 range through at least the spring, if not into the summer driving season.

Comments

  1. Agree! For some reason a lot of people are missing the connection of economy to oil to gas prices. Not too hard, economy is bad, will stay bad, so gas prices are range bound for this year.

  2. Oil prices will always be manipulated by Opec, so I don’t see how such prices will ever stay down for long.

  3. You are spot on! there is sure some sort of remorse looking at the bad economy.

  4. If I had a gas station, I would just set the pump with an infinity sign and then watch what the customers do.

  5. Beth and Terrence are both on the mark! No fear folks…this will get better in time. We cannot control it. Oil reserves are up , hence gas prices go down. OPEC made the announcement 1-2 weeks before the gas price spike….now look at the price…going down again. If you think oil is manipulated by our oil companies you have no sense or education in economics.!

  6. This is the same cycle all over again. Prices always start to go up as we get closer to spring. I’m getting the feeling though that this year won’t be as bad as last year. But only time will tell!

Trackbacks

  1. […] of the cold hard facts of driving today will is that gas prices are going higher and they probably won’t ever be coming back down. Most people can wrap their head around this fact quite well and indeed the average person is doing […]

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