The Days of $2 Gasoline Coming to an End

January 8, 2010 by 1 Comment

Don’t look now, but after spending the past two months fluctuating between $2.58 and $2.66 per gallon, the price of gasoline is now quickly approaching the psychologically important $3 mark.

According to GasBuddy.com, the average price of a gallon of regular unleaded gasoline has climbed to $2.72. The last time prices were this high was back in October 2008.

Today’s price is roughly 3% higher than a month ago ($2.64) and a staggering 54.5% higher than a year ago ($1.76).

Currently, three states are reporting an average price above $3 per gallon – California ($3.02); Alaska ($3.34); and Hawaii ($3.43) – while three other states are reporting an average price below $2.50 per gallon – Colorado ($2.47); Utah ($2.49); and Wyoming ($2.49).

Much of the recent rise in the price of gasoline can be attributed to the run up in the price of oil, which, in the face of a strengthening dollar, has climbed from roughly $69 per barrel mid-December to today’s price of nearly $83 per barrel.

As I stated in my recent post “3 Reasons Why Gasoline is Going to $5 a Gallon,” I’m fully convinced gasoline prices are going to head much higher in the near future. What are your thoughts? Leave a comment below!

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3 Reasons Gasoline is Going to $5 a Gallon

January 3, 2010 by 16 Comments

One of the benefits of The Great Recession has been a respite from high gas prices.  Unfortunately, I think this break will be over very soon and that record high gasoline prices are just around the corner.

Back in July of 2008, the average price for a gallon of regular unleaded gasoline hit a record high of $4.12 per gallon.  Within six months, the bottom had fallen out of the economy and the average price of gasoline had dropped to $1.60 per gallon.

Gas PricesThanks to drastic coordinated measures by the world’s central banks and governments, a total economic collapse was avoided, an economic rebound started to take hold, and gasoline prices climbed back to the $2.60 range.

While avoiding a total “end of the world as we know it” scenario was certainly something that had to be done, the money printing measures may have set us up to face much higher gasoline prices in the near-term future.

Below are the three main reasons why I believe not only will we break the record high prices set back in July 2008, but we can expect to start paying $5 or more for gasoline.

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$5 Gas – A Reality For Alaska

June 6, 2008 by 5 Comments

Today was quite a day for oil and gasoline prices. And from the looks of it, the worst may just be beginning.

A barrel of crude oil climbed a record $10.75 to close the trading session at a record high of $138.54. Are you beginning to sense a trend with the records?

Today’s jump was caused by two main factors: 1) the dollar falling sharply against most major currencies, specifically the Euro; and 2) the release of a forecast by a Morgan Stanley analyst which predicts crude oil will be trading at $150 a barrel by July 4.

This of course helped to push gasoline prices ever closer to the $4 mark. According to GasBuddy.com, the national average price of a gallon of regular unleaded gasoline is now up to $3.99. At this point, it appears the average American motorist will be paying over $4 a gallon come Monday morning’s commute.

Thirteen states and Washington, D.C. are now reporting average prices above $4 per gallon. Missouri currently has the lowest state-wide average price at nearly $3.75 per gallon.

And for the final kick in the pants? Today, America had its first state reporting a state-wide average price of over $5 a gallon.

As of late this afternoon, GasBuddy.com was showing the average price of gasoline in Alaska as $5.09 per gallon. While the price has since dropped to a more “reasonable” $4.83, it’s still pretty telling that enough people were reporting prices in excess of $5 that the average price ended up that high in the first place.

But, if you think this is bad, just wait until the International Energy Agency, a widely respected and independent source of energy information, releases a forecast showing global demand has outstripped global supplies. If (when?) that happens, today’s price increase will look pretty tiny.

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Another Day, Another Record For Gas Prices

May 22, 2008 by 1 Comment

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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$5 Gas on the Horizon?

March 24, 2008 by 4 Comments

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.

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