Rising gas prices are beginning to take a heavy toll on Americans’ personal finances. Recent data indicates that personal incomes and gross domestic product are beginning to be affected by the rising cost of fuel, as more money has to be spent at the pump. Prices are inching ever closer to the record high price set several years ago.
Nine states and the capital hit $4 per gallon
As of Friday, April 29, nine states and Washington D.C. had an average price of $4 for a gallon of gas, according to CNN. The national average gas price reached $3.90 with an increase of 2 cents overnight. The cost of gas has been going up for the past 38 consecutive days, and shows little sign of stopping.
The continued increase in gas prices has been credited to increasing prices of crude oil and scheduled spring maintenance at many American oil refineries. The price of crude oil has increased 20 percent since the start of the year to $110 per barrel. Refineries, where oil is made into gasoline, often shut down for short periods in spring for annual maintenance.
Americans feeling the pinch
While high oil prices certainly don’t hurt speculators or oil companies, the consumer has been feeling the pinch. The Commerce Department, according to USA Today, noted that consumer spending picked up only 0.2 percent in March, and the rate of GDP growth slowed to 1.8 percent for the first quarter of 2011 compared to 3.1 percent in the last quarter of 2010. People are begrudgingly paying more at the pump, and it isn’t because they more gas. According to Reuters, the American Petroleum Institute observed that from March 2010 to March 2011, demand for gas rose by only 6.1 percent. The cost of gas, on the other hand, rose by 22 percent over the same period.
Government is not amused
In response to the rising gas prices, the government is looking into curbing subsidies and tax breaks for oil companies. Bloomberg reports that the proposed 2012 budget submitted by President Obama included cutting $46 billion in oil company subsidies, and members of Congress are beginning to chime in. Max Baucus, chair of the Senate Finance Committee, submitted a bill with similar intent. However, other members of Congress are skeptical, as they believe cutting subsidies will reduce oil company investment, and that gas prices aren’t set by oil companies such as Exxon or Shell. However, oil companies are certainly not complaining about climbing prices. Exxon, for instance, recently reported a 69 percent increase in first quarter income.