Recent spike in gas prices the beginning of a long-term trend
Consumers can expect to pay higher gasoline prices in 2011 for a number of reasons. Global economic recovery and a falling U.S. dollar have sent crude oil futures past $90 a barrel in the past few weeks. Gas prices in many states in the U.S. average more than $3 a gallon, and energy analysts expect the trend to continue through the next decade.
Gas prices put a strain on income
The average gas price in the U.S. passed $3 a gallon last week for the first time since October 2008. Oil prices are also more than $90 a barrel for the first time since October 2008. According to the American Automobile Association, average gas prices in the U.S. have gone up 4 percent in the past month and up 16 percent from a year ago. The average driver spent $305 on gas in December, according to the Oil Price Information Service. Another study from PortiaGroup found that buying gas used 7.6 percent of median household income in 2010, up from 6.5 percent last year and 4.2 percent after the oil shock of 2008.
What is driving gas prices
Gas prices were already rising in November when Texas tycoon T. Boone Pickens predicted crude oil at $100 a barrel in 2011. Pickens last predicted oil at $100 a barrel in 2008. In July that year oil reached $145 a barrel. Gas prices in the summer of 2008 averaged more than $4 a gallon. Steep price increases forced consumers to curtail driving habits. As demand plummeted, prices adjusted accordingly. What is different about rising gas prices in December 2010 is that demand has remained constant. An increase in trading activity for oil futures and a falling U.S. dollar are driving the current spike in gas prices.
How high will gas prices rise?
Gas prices will keep rising and hit $5 a gallon in 2012, according to the former president of Shell Oil. John Hofmeister told Platt’s Energy Week that consumers can expect gas prices to soar along with global oil demand. Other analysts agree that $5 a gallon gas is inevitable, but say the global economy won’t grow fast enough to reach that price by 2012. In December the Organization of Petroleum Exporting Countries predicted a lower growth in global oil demand next year. Even with oil approaching $100 a barrel, OPEC hasn’t increased production.