Gasoline prices moved closer to $4 in several of America’s largest states based on population. They hurdled above that number in California, where the average price of a gallon of regular hit $4.26. The national price has risen to $3.68, from $3.52 a year ago, an increase of 5%. And the summer travel season is less than a month away as Memorial Day comes early this year — on May 26.
The worry that gas prices could reach $4 nationwide is based largely on three things. The first is that trouble in oil-producing nations — particularly Russia and in the Middle East — could temporarily interrupt supply. The second is that demand could skyrocket as Americans feel better about their economic prospects, just as the heaviest driving period of the year begins. The third is many refineries have turned to producing oil by-products because they have higher margins than gasoline production.
Perhaps the most alarming trend is that regular has risen above $3,80 in states that together make up more than a quarter of the American population. In Connecticut, the price has reached $3.95, according to the AAA Fuel Gauge. In Illinois, the price has hit $3.88, and the price in New York is $3.92. In Pennsylvania, the price is only two cents below the $3.80 threshold.
The only large state with low gas prices is the one with the greatest number of refineries — Texas at $3.48.
Owners of cars that run on premium face grim numbers. The average price nationwide has reached $4.02. In California the price is $4.46, and in New York $4.24.
The theory persists that at some level gas prices begin to undermine consumer spending, and that $4 may be a psychological hurdle at which Americans will cut their discretionary activity. Certainly, among lower- and middle-income families with members who have to drive a great deal, high gas prices compete with basic needs, including home and food costs.
It would be ironic that one of the signs of a better economy — high gas prices — could be a cause of renewed slowing in consumer activity.