Drivers in the USA could be paying as much as $3.75 a gallon for gas this spring, oil experts predict.
Prices at the gas pump have inched up all year as the cost of crude oil neared $100 a barrel. On Christmas Day, the average nationwide price of self-serve regular hit $3, a record for that day. By year's end, the average price reached $3.06.
Prices creeping toward $4 a gallon could have dire consequences for some industries and slow the economic recovery, analysts say.
The record price is $4.11 (average) a gallon on July 17, 2008.
"We learned in 2008 that $4-a-gallon gas is a deal-breaker for the economy," says Joel Naroff, president of Naroff Economic Advisors. "If it happens, it's not sustainable. There's only so much the consumer will bear."
He says drivers who need gas to get to work will buy it, but they'll cut spending elsewhere, sucking money out of the recovering economy.
Consumers react when the price reaches $3.50, says Tom Kloza, chief oil analyst for the Oil Price Information Service. People living paycheck to paycheck will cut back on other spending to compensate for higher gas prices, he says, and gas at $4 a gallon "throws us into a consumer slowdown."
"Oil prices ripple through every part of the economy," Kloza says. "I think it'll be the second highest year for oil prices on record."
He predicts the price of a gallon of gas will range from $3.25 to $3.75 in the spring and crude oil will exceed $100 a barrel for a short time. He attributes much of the increase to speculation in oil futures.
"I believe we're looking at the second-highest spring we've had to endure for fuel prices," Kloza says.
But he expects prices to fall as they did in 2008, when prices rose as high as $147 a barrel for crude and $4.11 for a gallon of gas before they fell at year's end to $33 a barrel for crude oil and $1.65 a gallon for gas.
"We learned in 2008 that when things become a little untethered, what comes up often comes down," Kloza says.
Consumers will feel the price hikes everywhere, says David Castelveter, spokesman for the Air Transport Association.
"It'll cost more to drive your car, more to heat your home," Castelveter says.
And it will cost more to fly, he predicts.
"It's safe to say that as fuel prices rise, airlines have to do certain things: Raise ticket prices, reduce costs, reduce the number of flights."
Last week, former Shell CEO John Hofmeister caused a stir when he predicted $5-a-gallon gas in 2012 as worldwide demand for oil grows while U.S. production shrinks. Developing wind, solar and biofuel alternatives will not generate enough power to meet the demand, Hofmeister says.
Asia's growing energy needs are pushing the global demand for oil to 88 million barrels a day, 3 million to 5 million barrels more than the world's production, Hofmeister says. The United States, which consumes 19.7 million barrels of oil a day, produces 7 million barrels and imports the rest, he says.
"Where are we going to get that extra 5 million barrels a day?" Hofmeister says. "Either the U.S. recommits itself to producing more domestic oil or we slip into a recession that reduces demand."
courtesy USA Today
