Just seven days into the new year and pump prices have surged past 2009 highs. With the average gallon of gasoline about $2.71 a gallon, a typical motorist using 50 gallons of gasoline a month will pay about $135 a month to fuel up. Last year at the height of the economic crisis, the average consumer was paying only about $85 a month.
In less than a month, crude oil prices have jumped 20 percent and yesterday surpassed the 2009 high. This has, in turn, propelled gasoline prices to a 15-month high. With the increase in fuel prices, Americans are now spending about $1 billion a day to fuel up their vehicles. But with the US economy still very weak and the ‘real’ unemployment rate around 17 percent, the question will be how much of an increased energy burden will the nation be able to bear.
What has caused the price of gasoline to jump recently? There are several reasons. The severe cold and winter storms have increased the demand for heating oil, so refineries have increased the production of heating oil at the expense of gasoline. Also, the uptick in the US economy has increased demand for gasoline, although it is still nowhere near the level of demand just two or three years ago.
And as for crude oil itself, there are numerous reasons for its rise. There are declining production levels from major oil fields globally – from Mexico to Russia. And there continues to be rising demand from emerging countries, such as China and India, where oil import records continue to be set on a monthly basis. And finally, there is the weak US dollar. Its weakness has caused some investors to purchase commodities, such as oil, as a hedge against further losses in the value of the dollar.