Americans are getting a sour holiday surprise at the gas pump, where prices are the highest they've been in over two years. They may even hit a national average of $3 a gallon by January.
Although supplies remain plentiful and gasoline demand has diminished since September, retail gas prices are rising because oil prices are at the highest levels since October 2008. The two-week advance continued on Monday as benchmark oil for January delivery rose 19 cents to settle at $88.96 a barrel on the New York Mercantile Exchange. A stronger dollar kept prices in check for most of the session. Since oil and other commodities are priced in dollars, a stronger dollar makes them more expensive for buyers who use other currencies.
The national average for a gallon of regular gasoline was $2.958 on Monday, according to the Energy Department's Energy Information Administration. That's about 10 cents higher than a week ago and 32 cents more than a year ago.
EIA said drivers in California pay the most, at an average $3.216 a gallon. Regular averages $2.802 a gallon in Gulf Coast states. Pump prices in major cities range from $2.669 a gallon in Denver to $3.241 in San Francisco. Gas stations in New York City charge an average $3.077 a gallon for regular. It's $3.066 in Chicago, $3.050 in Miami and $3.139 in Seattle.
"The U.S. has never spent Christmas with a $3-a-gallon average price for fuel," Oil Price Information Service said. The national average now is the highest since October, 2008, according to OPIS, and if oil prices linger near $90 a barrel, it could reach $3 before the end of the year, several analysts say.
"We're within spitting distance right now," said Stephen Schork, an energy analyst and publisher of The Schork Report. "Whether we get there by the end of the year or by the end of January, as far as consumer's concerned, we're there already by a psychological standpoint."
For every penny the price at the pump increases, U.S. consumers pay an additional $4 million, according to Cameron Hanover energy analysis agency. The 10-cent a gallon increase from a week ago cost consumers about $40 million. On an individual basis, a motorist who bought 10 gallons of gas Monday, on average, paid about $3.20 more than a year ago.
Schork expects energy demand to waver with prices between $2.90 a gallon and $3 a gallon. If oil reaches $100 a barrel, retail gas prices will be around $3.30 a gallon or higher, which would be a "significant obstacle" for motorists, he said.
In other Nymex trading in January contracts, heating oil lost 1.17 cents to settle at $2.4757 a gallon, gasoline fell 1.04 cents to settle at $2.3417 a gallon and natural gas rose 13.9 cents to settle at $4.488 per 1,000 cubic feet.
In London, Brent crude added 3 cents to settle at $91.45 a barrel on the ICE futures exchange.