Fuel prices rose 30 cents a gallon, on average, this past month. A holiday bump or a speculator binge?
“Ouch,” said Kim Paterno, a suburban Detroit saleswoman, as she pulled up to the pump at Sunny’s Sunoco, in Pleasant Ridge, Michigan. “It seemed like fuel prices had settled in under two bucks for such a long-time,” she said, almost wistfully,” but every time I stop here, or just drive by, the numbers are up another nickel or dime.
As recently as late April, most motorists in the Motor City could find regular fuel for less than $2.00. As locals prepare for the Memorial Day holiday, $2.40, even $2.50 is the figure at most pumps. And the situation isn’t limited to Michigan.
Oil prices soared to a six-month high, on Wednesday, though by late Thursday afternoon they’d slipped back by about a dollar, depending on grade and source, to around $60 a barrel. That compares with prices in the $34 range, earlier this year, and the $147-a-barrel peak, set in July 2008.
Current gasoline prices, according to the AAA, are up about 30 cents, over the last month, to around $2.36. That can vary widely, with some markets, like San Francisco, Los Angeles and Honolulu, starting to see numbers nudging $3.00. Over the 2008 Memorial Day holiday, the national average had already jumped to $3.80, with regular unleaded soon to punching past the psychology devastating $4.00 mark that many analysts believe helped shove the U.S. firmly into recession.
Why prices are soaring now depends on who you ask. It’s traditional for both refiners and retailers to try to maximize profits over a long holiday weekend. And there it doesn’t help that Americans are back on the road again. Motorists had taken the unprecedented step of trimming back their driving, over the last year, AAA is forecasting a 1.5% increase in the number of people traveling this holiday – to 32.4 million, or 10% of the population.
Compounding matters, the nation’s refineries were already cutting back production in light of the glut of gasoline supplies that had built up earlier in the year.
But “There’s no lack of gasoline right now or the lack of ability to produce it, and anyone who says speculators are not playing a role in this run is delusional,” Tom Kloza, publisher and chief oil analyst at the Oil Price Information Service, told the Associated Press.
Motorists aren’t the only ones warily watching the run-up in fuel costs. Every additional penny paid for a barrel of oil adds millions to the operating expenses of long-struggling airlines, and the nation’s trucking fleet could also see itself pushed back into the red if prices keep rising.
Just how much higher things will go is anything but certain. The fact that the recession has spread beyond U.S. shores has actually helped, analysts suggest, since it is reducing demand for energy in normally-fast growing markets like China and India. But recovery, even abroad, could nudge petroleum prices back onto the fast track.
Of course, the last year has proved that even the most savvy analysts and investors can be burned by the uncertain energy market. At the peak of last year’s rise, some of the most widely-quoted “experts” began predicting petroleum would hit $200, about a third more than oil’s actual peak. On the other hand, there were those, in the gloomy days of this past winter, who thought motorists might once again see gasoline drop below a dollar.
Which extreme will come closer to the truth in the months to come is yet uncertain. But if prices keep rising, automotive analysts say that could help increase public support for the newly-announced increase in federal fuel economy standards. Mileage, under the Obama Administration’s new rules, will increase an average 5% annually, to 35.5 mpg, by 2016.