U.S. gas prices were 6 cents per gallon higher on average than the night before when Americans awoke Friday morning. Since Sunday, U.S. gas prices have spiked 12 cents per gallon, and the trend is expected to continue. Economists warn that an oil price shock could be a major setback to the U.S. economy.
How high will gas prices rise?
The jump in pump prices, the largest one-day increase since 2008, is tied to a surge in oil prices. Oil prices have risen more than 10 percent in the last week and hovered at about $98 a barrel Friday after hitting the highest level since October 2008 — $103 a barrel — the day before. Pump prices vary widely in different states, depending on the gasoline tax. Hawaii led the U.S. in gas prices with a $3.757 per gallon average. Wyoming motorists only paid an average of $3.014 a gallon. Energy experts expect gas price increases, which lag behind oil price increases, to continue. This week’s surge in oil prices could result in an increase in gas prices of up to 37 cents per gallon in the next few weeks, according to Moody’s Analytics.
America’s petroleum ball and chain
Rising gas and oil prices are being driven upward by speculators buying oil futures on the bet that the popular unrest and an emerging civil war in Libya could spread instability across the major oil-producing countries of the Middle East. Moody’s said gas prices usually rise about 2.5 cents a gallon for every $1 increase in the price of oil. Economists estimate that each 1-cent increase in gas prices siphons $1 billion a year away from consumer spending. Moody’s estimates that if oil prices average $90 a barrel in 2011, spending on gas will eat up about a quarter of the $120 billion payroll tax cut that Congress had intended to stimulate the economy this year. Most of the money consumers spend on gas doesn’t stay in the U.S. economy. It goes to oil-producing countries where authoritarian governments hoard their riches while the people live in poverty.