Gas Prices Hit National Average of $4 a Gallon
Drivers across the nation are paying an average of $4 a gallon for the first time.
AAA and the Oil Price Information Service say the national average price for a gallon of regular gas rose to $4.005 overnight from $3.988.
Of course, this comes as no surprise to some drivers as gasoline has been above $4 in some parts of the country for more than a month. California, for example, has the highest rate, at $4.436 a gallon. (Missourians, incidentally, pay the least, with gas going for $3.802 a gallon in the Show-Me State.)
The good news is that others are now sharing the pain. The bad news is that gas prices are expected to keep climbing, putting increased pressure on already cash-strapped consumers.
Gasoline prices increase as oil surges in futures markets. Light, sweet crude shot up nearly $11 a barrel Friday and approached $140 for the first time.
While Americans who have to drive will feel the biggest squeeze, the increased prices also translate into higher costs for consumers and businesses, who will be forced to shoulder increased costs for food and anything else that needs to be transported.
"I don't think we've felt quite the full impact of $138 or $139 a barrel oil," said Jason Toews, co-founder of fuel price research site GasBuddy.com.
Prices have risen by about 20 cents in the past three weeks, according to a report by the Lundberg Survey released Sunday.
Truckers and others with diesel engines under the hood have it even worse off. A gallon of diesel now sells for $4.762, up nearly a penny overnight, according to AAA and OPIS. Prices hit a record atop $4.79 at the end of May.
"This could be a real weight on the economy," James Cordier, president of Tampa, Fla.-based trading firm Liberty Trading Group, said of oil's jump Friday. "With every nickel that gas goes up, people are driving less and less."
Oil's latest surge caught some longtime petroleum industry veterans off-guard, and left analysts wondering if it represented a one-time spike or the beginning of a new wave of advances.
Yolanda Cade, managing director of public relations at AAA, said gas prices are likely to rise further, although the automotive club is waiting to see where oil prices head this week before making any new predictions.
"We've cautioned gasoline station owners against not recklessly increasing retail prices just because of one big jump in the crude market," she said Sunday. "One day of trading doesn't constitute a market trend."
A number of factors are behind oil's ascent.
Soaring demand in Asia and elsewhere is ensuring global supplies remain tight even as Americans cut back; recent figures from the U.S. Energy Department's Energy Information Administration showed U.S. gasoline demand actually fell 1.4 percent over the last four weeks.
A tumbling dollar is also contributing to the increase. Many traders buy commodities such as oil as a hedge against inflation when the dollar is falling, and a weaker dollar makes oil cheaper for investors dealing in other currencies.
The rapid increase has also enticed speculators, frustrated by low returns elsewhere, looking to make a quick profit.
The influx of so much fresh money into energy markets has caught the attention of federal watchdogs. The U.S. Commodity Futures Trading Commission recently said it has begun a probe of U.S. oil markets focused on possible price manipulation.
For many drivers, the higher gas prices mean rethinking everyday habits. Some are reining in gas consumption, either by cutting back on all but the most essential driving or looking anew at alternatives like public transportation.
Sales of gas-guzzling vans and sport utility vehicles are down, while those of fuel-efficient compacts and hybrids are on the rise.
Others are getting creative.
Take Robert Torrey of Connecticut, the state tied with Alaska as the second most expensive for gas. After leaving work in the town of Windsor Locks last week, he drove across the border into Massachusetts to fill up his van with $100 worth of gas. He figures he's saving about $10 per fill-up by traveling the 18 miles north.
"I let it run all the way down to the bottom before I get here," said Torrey, while pumping gas at the Pride station off I-91 in Springfield, Mass. "I try to combine it with other trips while I'm up here, so that makes it worth the drive."
A key reading on consumer inflation is due out on Friday, when the government delivers its report on May consumer prices.