Consumer Products

Sharp Rise in Gas Prices, Some Areas at $4

The dreaded $4-a-gallon price for an average gallon of gasoline has not been reached nationwide, but as that national average spiked to $3.635 yesterday, some parts of the country are already across the higher threshold. The national price was $3.513 a month ago, so it has moved up 3.5% since then. Most experts believe that relatively tight inventories and the oncoming summer driving season will pressure prices more.

One concern about national gas prices is that several factors which are unpredictable could happen suddenly. The first is that political and violent turmoil in the Middle East, southern Africa, and Ukraine may interrupt supply. Some of that supply interruption would be in Europe. However, the U.S. continues to import crude from the Middle East. The “psychology” of gas prices includes panic about supply, even if that supply is never actually interrupted. It does not take much in terms of headlines for oil-rich regions to affect prices.

Another problem is that a recovering economy means higher demand. The irony of this is that higher gas prices can hurt GDP growth. No one knows for sure what the exact relationship between high gas prices and consumers activity is. But, for lower and middle class Americans, particularly those who drive, it cannot be good.

Finally, the hidden factor which affects gas prices is refinery capacity. Some of this has to do with whether large refineries are shuttered for repairs. Another is that oil companies often decide it is more profitable to refine other oil by-products. In the meantime, the gasoline supply tightens

California is the largest state in the U.S. by population: About 12% of Americans live there. The price of an average gallon of regular in California is $4.158, according to AAA’s Daily Fuel Gauge Report. In several other states with large numbers of residents, gas prices are also very high compared to the national average. Those include, at levels well above $3.75, New York and Illinois.

Among other large states, including Michigan, Indiana and Florida, gas prices are well above the national average. In those, prices could reach $4 by summer. That’s only two months away.

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