The Inevitability of $3 Gas

The national average price of a gallon of regular unleaded gasoline continued to climb overnight, and now stands at $2.88 per gallon.

With the busy summer driving season rapidly approaching and more people buying into the economic recovery — I think it’s just a head fake before the second leg down — it now appears that it is only a matter of time before the price of gasoline climbs back over the psychologically important barrier of $3 per gallon.

Today’s price of $2.88 is only slightly higher than a week ago ($2.86), and not much higher than a month ago ($2.80).  However, today’s price is over 40% higher than a year ago ($2.04) when we were still wondering if the financial system and the economy were about to collapse.

While the national average price of gasoline might be below $3, that certainly doesn’t mean some parts of the country haven’t already crossed that threshold.  Nine states and Washington, D.C., have an average price above $3 per gallon, with Hawaii having the most expensive gas at $3.65 per gallon.

Conversely, there are still several states that are well below the national average, with New Jersey reporting the lowest average price at $2.66 per gallon.

If the economy continues to show signs of improvement, and inflationary pressures on energy prices continue to increase, I think it’s fair to say we’ll all be sharing in the pain of $3 gas by Memorial Day weekend.

The Days of $2 Gasoline Coming to an End

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!

3 Reasons Gasoline is Going to $5 a Gallon

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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Oil Above $78, Gasoline $1 Higher Than 12 Months Ago

Due to falling reserves, a slightly weaker dollar, and belief in the economic recovery, the price of oil has climbed to over $78 per barrel, which is its highest price since December 1, when the price stood at just below $78.50.

In turn, there has been slight pressure on the price of gasoline, which is up two cents for the week and now stands at $2.61 per gallon. There is usually a little bit of a lag between when swings in the price of oil hit the price of gasoline, so there will likely be a slight jump in the price of gasoline over the coming weeks.

Over the past month, the price of gasoline has moved in a very narrow range between $2.58 and $2.64 per gallon.

While this is certainly welcome news to cash-strapped consumer, the jump in the price of gasoline over the past year certainly is not. The price of gasoline is now $1 – or 62% – higher than it was at this time last year.

Currently, only Alaska ($3.77) and Hawaii ($3.68) are reporting state-wide average gasoline prices above $3 per gallon, while 14 states are reporting an average price below $2.50 per gallon. Missouri has the lowest average gasoline price in the United States at $2.41 per gallon.

Gas Prices Climb For First Time in Nearly 45 Days

The national average price of a gallon of regular unleaded gasoline climbed by 1.1 cents today – up from $3.68 to $3.691 – marking the first daily price increase in 43 days.

Since hitting its record high of $4.12 per gallon on July 16, the price of gasoline has fallen or remained steady, up until this morning.

Currently, only Hawaii and Alaska are reporting state-wide average gas prices above $4 per gallon, at $4.55 and $4.40, respectively. New Jersey has the lowest state-wide average gas price at $3.44 per gallon.

But, keep in mind, while the recent price declines have come as a welcome relief, we’re still paying more than a third more for gas than we were just a year ago.

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$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.

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