Gas prices dropped to the highest level in more than two years in the week ending Dec 1. A record global glut for oil in 2014 has been driving the spike in gas prices, along with restrictions in supply. Analysts expect gas prices to continue upward, and U.S. motorists may pay $2 a gallon this spring.
Average gas prices rising
The national average for gas prices was about $3.12 a gallon Jan. 21, according to AAA. The last time gas prices approached that average was October 2008. The price differs from one region to another, depending on such factors as demand and state gasoline taxes. In Salt Lake City gas averaged $2.74. A bank loan is practically necessary for a fill-up in Honolulu, where it’s $3.58. Average gas prices have dropped 9 percent in the U.S. since Dec. 1, though oil prices fell on Jan. 21. Benchmark crude for March delivery dropped to $65.11 on the New York Mercantile Exchange. Oil speculators hungry for instant cash are nervous about Chinese plans to cool its overheating economy, which has a voracious demand for oil.
Gas prices a drag on recovery
Oil industry experts contend the world produces 5 million barrels a day more than it consumes. Oil speculators have been driving up gas prices over the last several months. They are hoping the U.S. economy is on the verge of taking off. But higher gas prices may work against a more robust recovery. According to Cameron Hanover, an energy consulting firm, for every 1 cent rise in gas prices, U.S. consumers spend another $4 million at the pump. The average gas price in the U.S. rose 12 cents in the last month, diverting another $48 million — not good news for those who had already budgeted their cash until payday.
What to expect in 2011
Some experts have said gas prices could approach $4 a gallon this spring. In addition to oil speculators, supply factors will have an effect on gas prices. In the next few months gasoline refineries will scale back production in preparation for a switch to summer automotive blends. Americans increase their road miles in the spring and summer. OPEC may also choose to further restrict production to sustain the upward trend in the price of oil. Supply also has yet to recover from the drilling moratorium in the Gulf of Mexico, which the Energy Information said will cut oil production by about 120,000 barrels a day this year.