CosmicRocker

Unseasonably Higher, Gas Prices Add to Strain on U.S. Consumers
By CLIFFORD KRAUSS
Published: November 8, 2007
HOUSTON, Nov. 7 — Most years, the shorter days and lower temperatures of autumn mean falling gasoline prices, as demand eases from the busy summer travel season.

With oil futures nearing $97 a barrel, the price of home heating oil is rising this winter, following record gas prices. A fuel service made a residential delivery in Guilderland, N.Y.

But this year, high oil prices are upsetting that seasonal rhythm. Prices at the pump are climbing fast, bringing back memories of summertime gasoline bills.

The national average for regular gas surpassed $3 a gallon this week, and drivers could be paying record prices this holiday season, experts said. The timing of such an unusual jump could crimp consumer spending at a vital time for retailers.

“Usually Americans have more money to spend each holiday season because gasoline prices tend to give up 25 percent of their value after summer,” said Tom Kloza, an analyst with the Oil Price Information Service. “But this year there is a second coming of the gasoline rally that may be the Grinch that stole Christmas.”

Barring some unexpected development like a big drop in the price of oil, Mr. Kloza and other experts said, gas could be headed toward $4 a gallon by spring. Gasoline prices have trailed surging oil prices, but they are starting to catch up as crude oil nears $100 a barrel. Oil settled down slightly yesterday, at $96.37 a barrel.

On Wednesday the national average gas price for unleaded regular reached $3.04 — an increase of nearly 28 cents in the last month, according to AAA, the automobile club. Average gasoline prices in November had never exceeded $3 a gallon before this year. A year ago, the average price at the pump was $2.20, meaning it costs roughly $12.50 more today to fill a car with a 15-gallon tank.

In some states the average price motorists are paying is much higher. In California, for example, the price on Wednesday averaged $3.31.

For now, prices are well below the record of $3.23 a gallon, set during a spike last May. But recently they have been rising by 2 cents a gallon every day. Motorists are feeling the pain across the nation.

Jim Lunn, 48, wore a sweatshirt bearing the name of his favorite football team, the Cleveland Browns, as he filled the tank of his red Dodge pickup this week at a station in Avon Lake, Ohio. He said he liked going to games, but these days, he often stays home on game day.

“With gas prices being what they are, I can’t afford to drive all the way downtown,” he said. “So I just watch the games at home. It’s nowhere near as fun.”

If gasoline prices are causing motorists to drive less over all, it is not evident in the national statistics. Americans have consumed an average of 9.3 million barrels of gasoline a day so far this year, an increase of 0.6 percent from last year, according to the Energy Department.

One reason many consumers have shaken off the gasoline price increase may be that gasoline expenditures claim less than 4 percent of after-tax personal income today, compared with more than 6 percent in 1981 when gasoline prices were also high, according to a recent study by the Federal Reserve Bank of Dallas.

But there are signs that many Americans are feeling the pinch, and business economists are worried that rising gasoline prices will cut consumer spending this holiday season.

Michael P. Niemira, chief economist for the International Council of Shopping Centers, said that average weekly earnings of American households over the last year have outpaced increased expenditures for gasoline. But he added, “With the expectations of higher gasoline prices and home heating expenses this winter, the potential exists that consumers will have less discretionary purchasing power.”

He noted that over the last couple of years consumers have been consolidating their shopping trips to save on gas. Meanwhile, lower-income drivers are especially unhappy with prices at the pump.

At a gas station in Norwalk, Ohio, where gasoline was selling on Tuesday for $3.09, drivers said the cost was crimping their lives.

“Generally, I go out less now,” said Janet LaVigne, 51, who fills her 1994 Mazda Protégé daily to deliver newspapers in communities outside Cleveland. “I do my job and come home. I used to go out to the movies, sometimes to restaurants, but now I can’t afford the gas.”

Sara Scheerer, a 17-year-old high school senior, said the high cost of fueling her 1999 Ford Explorer to drive to basketball team practices and school had forced her to get a salesclerk job at Walgreens. “I can’t spend as much money on other stuff like clothes,” she added.

Energy experts see few signs that gasoline prices will ease soon.

Geoff Sundstrom, a spokesman for AAA, projected that average regular gasoline prices nationwide would be at least $3.20 by Christmas. Amanda Kurzendoerfer, a commodities analyst at Summit Energy Services Inc., an energy manager for large users of oil and natural gas, predicted a price as high as $3.50 by Christmas — which would be a record for any time of year.

“If you look at gasoline prices relative to oil, it’s low right now,” she said. “Oil fundamentals are tight and tightening through the end of the year, demand has continued to be strong, non-OPEC supply is not keeping up and OPEC appears to not be eager to boost production.” She was referring to the Organization of the Petroleum Exporting Countries, the oil cartel.

Ms. Kurzendoerfer predicts that while oil prices could exceed $100 a barrel in the near term, they will average $75 to $80 in 2008. Still, she said gasoline prices would most likely be higher in the spring when refiners have to produce more expensive blends for warmer weather and the heavy summer driving season begins.

William R. Veno, an expert on gasoline at Cambridge Energy Research Associates, an energy consulting firm, also projects lower crude prices next year. But he warned that gasoline inventories could drop in the coming months as refiners expect to produce more profitable heating oil for the winter, leading to further pressure on gasoline prices.

“We could enter the springtime with unusually low inventories,” he said, “which would add further to very high gasoline prices in the spring.”

Christopher Maag contributed reporting from Ohio.

__________________

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Get on the right thing
My little love, you cant go wrong
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shall we start a pool on when it will top $4?

i'll say by feb. 1, 2008