The U.S.'s average price for gasoline topped $3.50 per gallon this week, The New York Times reported Tuesday, and energy traders and analysts said the record-high prices are likely to continue to move higher, absent a major cutback by consumers. A confluence of factors is forcing U.S. gasoline prices higher, overwhelming the fact that weekly U.S. gasoline consumption has declined for almost three straight months -- the first consumption decline in more than 15 years.
"So far, U.S. consumers are doing their part, but it isn't amounting to anything, which is a shame," economist Glen Langan told BloggingStocks Tuesday.
Bleak gasoline conditions
Langan said limited refining capacity in the United States, oil prices touching a record $119 per barrel, and investor-fund activity is "conspiring to create the worst of all possible gas worlds for American drivers, and rough conditions for the American economy as well."
Typically, gasoline prices rise in the spring, as refiners perform system maintenance and convert plants from winter heating oil production to summer gasoline production. Increased gasoline consumption in the spring also boosts gasoline's price. However, as noted, this spring gasoline consumption has declined, due to behavior change and the slowing U.S. economy, but refinery capacity is also down, Langan said. The latter means the U.S. will have considerably less gasoline available this spring and summer -- more than offsetting any potential price declines from reduced consumption, he said.
Further, Langan said that barring a surge in imports -- the U.S.'s refinery capacity is so inadequate that it has to import more than one million barrels of gasoline a day in the summer -- prices are likely to continue to rise another 25-30 cents as the summer progresses, perhaps more.
In some high-cost sections of the United States, such as New York and California, gasoline is near or above $4 per gallon. In parts of San Francisco, all grades are above $4, with super unleaded approaching $4.30 per gallon, according to The New York Times.
Conservation deemed key
What could check the price rise? A major consumption cutback by U.S. drivers, Langan said, but he underscored that drivers would have to cut gasoline consumption by 20-30% for the action to affect prices. Smaller cutbacks "won't reduce demand enough to take pressure off prices."
Historically, Americans have reduced gasoline consumption by large amounts only twice, Langan said, if you discount World War II in 1941-45, when gasoline was rationed, and during Hurricane Katrina in 2004, which closed gas stations in the Southeast U.S. for weeks. Both major consumer cutbacks occurred during the previous oil shocks, in 1973-74 and 1979-80.
"We're going to need a major conservation effort again or gas prices are going to remain at or above $3.50 a gallon for a very long time," Langan said.
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Reader Comments (Page 1 of 1)
4-22-2008 @ 4:38PM
JD said...
Only a take over of the Middle-East and incorporation as an oil resource territory will open the oil valve on the ocean of oil under the region.
The desert people are extorting the rest of the world by not delivering the oil we need by just turning the tap off and creating false scarcity; I would prefer $1 a barrel oil which could be achieved by force...the only rational policy.
Please spare me the ignorance of conservation. Lets use it up quickly before the sun detonates or the big comet strikes.
4-22-2008 @ 4:37PM
John Huckleberry said...
If the US would ban exporting oil out of the US the price of oil would hit a new low. Bush hasn't the American proud to halt exporting US oil.
4-22-2008 @ 5:46PM
moonie said...
Only 2 things can slow down the price of gasoline NOTHING ELSE !1. Conserve drive less ride a bike some, smaller vehicles, DON'T DRIVE OUT OF STATE ON VACATION ETC> #2. Every American create a buy-no- gas day. Let's pick tuesday of every week buy no gas at all sounds silly but if millions did this it would create a glut therefore slowing down production creating a storage overflow problem bringing prices down.If ALL drivers did this there would be a huge storage problem then the price has to come down. Pass tis on COME ON AMERICANS WE CAN DO IT!!!
4-22-2008 @ 6:48PM
Dan Barnett said...
JD, this is a serious site, please peddle your non-sense elsewhere.
4-22-2008 @ 7:16PM
Michael Schneider said...
What would help lessen gasoline consumption? Raising the gasoline tax seems politically difficult now but we have been advocating a tax rebate for low mileage drives that would provide some financial incentive since prices alone are not doing the job. John McCain has said that people who drive most are lower income so any gas tax would be unfair. There may be some truth in that but if you provide a tax rebate it could help regardless of who it goes to as everyone, especially lower income people if John McCain is correct, would benefit from lower gas prices. A tax rebate would have an advantage of helping to boost the economy without increasing pressure on a scarce resource and it would help take some speculation out of the markets so we don't have another boom/bust bubble like we have had with the dot coms and housing.
4-22-2008 @ 8:47PM
henry said...
better yet get rid of that scumbag parasite president bush, that would help solve one problem, of the thousands he has created. along with his father, will take america many years to recover and he will go down as the worst of the worst president america has ever had
4-23-2008 @ 1:47AM
Bii said...
I'm retired and drive my diesel truck 1/4 the miles I did when fuel was .97 a gal. in 1998.
5-02-2008 @ 5:51PM
Ken said...
The American public needs to support our transition to bio fuels (ethanol and Bio diesel).
There needs to be an alternative to Big Oil and the suppliers from the middle east.
We need to diversify our transportation fuel choices so that when you go to the pump you can choose either a bio fuel or gasoline depending on which one is cheaper.
Our National Security is at stake. We can not keep sending our money to countries that are not our friends and watch them use our money against us.
We need to develop an American bio fuel industry with American workers, making an American fuel for American transportation needs. This is good for jobs and good for the economy here in our country.
Invest in bio fuels, buy bio fuels and vehicles that can use them
4-30-2008 @ 10:13AM
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