The unseasonably warm weather isn’t the only sign of an early spring. Roiled by the specter of Iranian oil cutoffs, gas prices are rising at a record pace, crossing the $4-a-gallon threshold in some parts of the country, and threatening to break an all-time high, experts say.
Fears of $5 per gallon gasoline are in the back of some motorists’ minds, jeopardizing the nascent economic recovery and fueling campaign rhetoric during a presidential election year.
“Everybody was worried about Europe as being the precipitating factor to sort of throw the world into a slowdown,” said Tom Kloza, chief oil analyst at Oil Price Information Service. “Higher oil prices could do that too.”
Creeping up steadily over the last month, the national average for a gallon of regular hit $3.57 Monday — up from $3.17 a year ago, according to AAA. Prices typically rise in the spring across the country, as suppliers introduce a warm-weather fuel blend that burns cleaner and costs more money.
Kloza is predicting a national average of $4 to $4.25 per gallon by April, which would increase the chances of hitting a record high. The all-time high nationally was in July 2008, when an average gallon of regular unleaded sold for $4.11.
In the Chicago area — home to gas prices that traditionally are among the highest in the nation — prices are up from last year at this time, when the area was headed toward a local record of $4.47 per gallon in May. But prices have dropped 10 cents a gallon in the last month to $3.54 per gallon — falling below the national average. It’s an unusual trend that may continue going forward.
“We’re the anomaly right now,” said Beth Mosher, AAA Chicago spokeswoman.
The Midwest’s supply comes mostly from Canada and the Southwest, which is pegged to the price of West Texas Intermediate crude oil. There is a surplus of North American oil that could keep prices down for up to a year, analysts said.
Still, the prices are high enough for many drivers throughout the Chicago area.
A delivery driver for Budweiser, Brian Thomas, 42, of Waukegan, commutes more than 60 miles a day for his job in Arlington Heights. Thomas, who has been juggling his bills to make ends meet, tries to buy gas in Lake County, where, he says, it’s about 10 to 15 cents cheaper per gallon. But with his tank near empty Monday, he reluctantly filled up at a Speedway in Des Plaines. “It’s very tough because you have to make these tough decisions to make it to work,” Thomas said.
Prices are much higher on the East and West coasts, where imported fuel is tied to Brent crude, the European benchmark directly affected by Iran and other Middle Eastern suppliers.
International sanctions on Iran over its nuclear program have led to threats that Iran would stop oil shipments to Europe and developing nations. Those threats have contributed to steady increases at the pump this year. The move by Iran on Sunday to cut off its supply to Britain and France may have been priced in, some analysts said.
“When people talk about $5 (per) gallon, that’s kind of worst-case scenario,” said Mike Lynch, president of Strategic Energy & Economic Research, a consulting firm. “If we don’t see (more) cutoffs in Iranian oil supplies, or attacks on oil shipping, we’re probably close to a peak now.”
Whether they break a record or not, rising gas prices could stunt the nation’s sluggish economic recovery. Economists say that higher oil prices may have crimped retail sales.
Apart from automobiles, growth in consumer spending for goods and services has been easing recently — despite a pickup in hiring and income gains.
“I think it’s one of the biggest risks in the outlook,” Gary Schlossberg, senior economist at Wells Capital Management in San Francisco, said of rising fuel costs. “We’re in a yellow zone.”
Rising gas prices — in addition to stoking concerns about the economy — are providing fodder for Republicans vying to challenge President Barack Obama in the fall.
Republican presidential primary hopeful Rick Santorum on Monday blamed Obama’s “radical environmentalist policies” for the increasing gasoline prices.
Campaigning in Georgia over the weekend, Newt Gingrich reiterated his pledge to lower gasoline prices by accelerating domestic oil exploration and production.(Chicago Tribune)
