What’s going on with gasoline prices?
Atlantans, Georgians and virtually all Americans who drive cars have good reason to ask that question, and good reason to worry.
In 2011, despite a weakened U.S. economy and high unemployment, crude oil averaged $95 per barrel and gasoline averaged $3.52 per gallon for the year. The typical American household paid $4,155 for gasoline in 2011, according to the Oil Price Information Service. That’s 25 percent more than the $3,315 paid in 2010.
In Georgia, 2011 began with gasoline averaging $2.97 on Jan. 1, and, as it does each spring, it rose sharply, peaking statewide at $3.95 per gallon on May 12. In metro Atlanta, the peak on the same day reached $4.01 per gallon. Prices remained above $3.50 for much of the year, declining in the fourth quarter to end the year at $3.20 per gallon on Dec. 31.
That year-end price has become a troublesome sign because it sets the “floor” for the coming year. In this case, Georgia’s $3.20 — and the nation’s $3.25 per gallon — are the highest average retail prices we’ve ever seen at year’s end.
When we review the national prices over the past seven years, we see the average movement from the Dec. 31 “floor” to the peak price, (whenever that occurs in the next 12 months) was 93 cents per gallon. 2011 exemplified the trend. We saw the year begin at $3.05 per gallon and the national average peaked on May 11 at $3.96 per gallon (a 91-cent spread). Only once in the past seven years was it less than 82 cents per gallon. Already, gas prices in Atlanta and across the state are more than 15 cents per gallon higher than they were on Jan. 1. One reason: the increase in global demand for crude oil, even while U.S. demand remains tepid.
And as we’ve seen in recent weeks, Iran’s threat to close the Strait of Hormuz, a major channel for global oil commerce, added a premium to crude oil. With rhetoric alone, Iran created enough nervousness in the financial markets to raise oil prices, benefiting all OPEC members.
Geopolitical issues can impact crude oil and retail gasoline prices at almost any time. Among them are Iran’s threat, fluctuation of the U.S. dollar versus world currencies, commodity speculation, refinery/infrastructure issues and bottlenecks, supply and demand fundamentals, and adverse weather such as hurricanes.
It also should be noted that in 2011 — for the first time since 1949 — the U.S. became a net exporter of petroleum. The U.S. exported approximately $88 billion worth of crude oil, gasoline and jet fuel, or 117 million gallons per day, according to USA Today. That means oil companies effectively reduced domestic supply of gasoline and other petroleum products.
That created a direct impact on the supply/demand equation that raises gasoline prices in the U.S. while securing greater profit margins on the product shipped overseas.
Rising exports and other geopolitical and economic conditions suggest crude oil price trends could surpass last year’s $95 average.
It is for all of these reasons — and because 2012 began with the highest retail gasoline prices ever — that most states, Georgia included, likely will find themselves paying in a range from $3.75 to $4.20 per gallon by Memorial Day.
Many states — particularly those with combined federal, state and local taxes at 50 cents per gallon or higher — could see 2012 peak prices exceed $4.50 per gallon.
From a consumer perspective, it all brings to mind a statement of Woody Allen’s: “It’s not whether we’re paranoid, it’s whether we’re paranoid enough.”
Gregg Laskoski is a senior petroleum analyst with Tampa-based GasBuddy.com.
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