Gasoline prices are up sharply in the past month on surging crude oil costs and refinery woes, and now are likely to make 2012 the costliest year ever at the pump.
Nationally, gasoline averages $3.70 a gallon — up 30 cents since mid-July and is now higher than year-ago levels in 39 states. Prices are likely to continue climbing through August, with little relief until after Labor Day.
The swift, month-long, 9% price climb has lifted 2012's average to $3.61 a gallon, vs. 2011's $3.51, which had been the most expensive year ever for motorists. Even with demand expected to recede after the peak summer driving season, 2012 will surpass last year's price, says Brian Milne of energy tracker Telvent DTN .
The run-up comes at a time when prices typically have peaked for the year, and just weeks after decreasing demand and slowing worldwide economic growth pushed prices well off 2012 highs. The trend had prompted some industry experts to forecast $3 a gallon gasoline by autumn. Now, Milne expects a top at about $3.90 before dropping in September.
Motorists in the Midwest are already paying that much, or more. Fallout from production cuts at four Illinois refineries has pushed prices in Illinois and Michigan to $4 or higher, while West Coast prices rocketed 40 cents a gallon following last week's fire at a Northern California Chevron refinery.
Scott Anderson, chief economist at Bank of the West, says if prices continue to rise, they could crimp a rebound in consumer spending. The Commerce Department reported Tuesday that July consumer spending rose 0.8%, the largest gain in five months.
"The $4 threshold is when you see sticker shock and marked changes in consumer behavior and spending patterns," Anderson says.
"When prices come down, that really revives disposable income. The longer we see these highs, the more impact you'll see on consumer spending."
Michael Green, spokesman for auto club AAA, says most consumers have locked in vacation plans for the summer and aren't likely to curtail trips. "Whenever prices rise, it has a major effect on what people spend and save," Green says. "People are still going to take extended trips, but they might decrease what they spend on souvenirs or cut back on that expensive dinner."
Businesses already accustomed to sharp price increases are accelerating plans to save on fuel. Swimming pool services operator VivoPools has been shifting its 68-truck fleet of full-size pickups to midsize trucks in California, Nevada, Arizona and Florida. After testing a hybrid car, VivoPools will hasten the move to gas sippers. "We're definitely looking for ways to save more now," operations manager Caren Chen says.