Gasoline prices' rise evokes 2008
That year, gas costs set record highs, hurting the economy. Analysts disagree on whether a repeat is in store.
 Gas prices in downtown Washington in late December. The record national average price is $4.114 a gallon, reached in July 2008. (Paul J. Richards, AFP/Getty Images / January 8, 2011) |
The grumbling you've been hearing at gas stations isn't your imagination: It's the sound of motorists looking at pump prices that have been rising toward record highs for this time of year.
The average retail price of a gallon of gasoline Friday was $3.083 nationally and $3.342 in California, up substantially from $2.709 nationally and $3.032 in California a year earlier, according to AAA's daily survey of fuel prices. The Energy Department's weekly gasoline price survey, released Monday, showed similar results.
Analysts attribute the surge largely to higher crude oil costs, which on Monday jumped to $92.66 a barrel, a 26-month high, before settling lower. Oil closed Friday at $88.03 a barrel in New York futures trading.
The last time gasoline prices began the year at similar levels, in 2008, they reached all-time highs by June and July. That has motorists concerned that such a run-up might happen again.
"It's just ridiculous. Every day it's another big bite out of my income. I've gone from $40 for a fill-up to $60 for a fill-up in just the past several weeks," said Eric Ott, a 47-year-old Valley Glen resident who saw prices as high as $3.89 a gallon Friday from behind the wheel of his 2007 Jeep Liberty.
To Ott, a freelance information technology troubleshooter who used to command as much as $60 an hour, it doesn't feel like the recession has ended. With so many out-of-work IT specialists competing for jobs, Ott says he's earning only about $35 an hour.
Ott's thirsty Jeep isn't helping, but because it is worth less than what he owes on it, he doesn't feel he can afford to get rid of it. His health insurance premiums are about to rise substantially, Ott said, and shopping for groceries at Costco is no longer affordable. Now, he says, he does most of his shopping at 99-cent stores.
"These gasoline prices are very near my breaking point," Ott said.
Analysts disagree about whether drivers will see a repeat of 2008's record California average of $4.588 a gallon, reached that June, according to Energy Department records, and about whether the national average would approach its record of $4.114 a gallon, reached a month later.
"We could be in for another real roller coaster," said Jeff Spring, a spokesman for AAA in Southern California. AAA's Daily Fuel Gauge Report showed record highs for December prices last month.
"These are the kinds of numbers that serve as a launching point for investors putting more money into commodities, pushing up the price of oil, which pushes up the price of gasoline," Spring said.
Patrick DeHaan, senior petroleum analyst for the 250 local price-posting websites of GasBuddy.com, said that prices this summer might exceed the 2008 records.
"We're seeing pretty big drops in crude oil inventories. Demand is rising, and OPEC is showing no signs that it is interested in increasing supply," DeHaan said.
But Tom Kloza, chief oil analyst for the Oil Price Information Service, said prices could be mitigated this year by factors that weren't in play in 2008. Among them, Kloza said, is a European debt crisis that could strengthen the U.S. dollar and draw investors' money back out of commodities, including oil.
The biggest difference this time might be the memory of what those 2008 prices did to worsen the recession, Kloza said.
"The memory of 2008 serves as a big red flag," he said. "Those kind of prices can spawn a tremendous amount of demand destruction" — in other words, the costs can cause people to drive less — which would help lower prices.
"It's a big warning," Kloza said, "that we cannot expect brisk economic growth with oil at $120, $130, $140 a barrel and gasoline at $4 a gallon and higher."
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