Premium gasoline prices have risen above $4 in eight states, raising the concern that consumer spending could be damaged by the trend. At the same time, the price of regular has also soared, and in some states has topped $3.75, according to the AAA Fuel Gauge.
The current average price for a gallon of premium nationwide is $3.847, up from $3.658 a month ago. The price broke the $4 level nationwide a year ago. Several factors could contribute to the countrywide premium price piercing that number again soon.
The eight states where the average price of a gallon of premium has topped $4 are Alaska, California, Connecticut, Hawaii, Illinois, New York, Vermont and Wisconsin. The price is just pennies below that in Michigan and Pennsylvania — the sixth and ninth states based on number of residents. In total, the population of these 10 states is close to one-third that of the entire United States.
The largest triggers to a further run up in gas prices are the unusually cold winter and fear of unrest overseas. Additionally, OPEC has just raised its oil demand forecast for 2014 because of a resurgence of the economies in America and Europe. If Chinese officials are correct, gross domestic product (GDP) there will expand by 7.5% this year — another sign the demand for oil will continue to swing upward.
The European recovery has hardly started, and in nations that include France and much of southern Europe, the improvement from the recession is barely evident. In the United States, the recovery remains tender. Although unemployment in America has dropped to near 6%, the economy has added fewer than 200,000 jobs in most months since the end of last summer. Gas prices will affect the middle and lower classes soon, if they have not already. While these groups may not be likely buyers of premium gasoline, the spike in the price of regular will harm their consumer spending habits.
U.S. GDP remains dominated by consumer spending. If the economy is to become more robust by mid-year, the current rate of consumer activity will need to rise sharply. At this point, that pickup is in danger, and one of the largest contributors is the cost of driving.