It could be a tough time for American motorists when they hit the road for the vacation season with gasoline prices poised to hit record highs.
The average pump price for self-serve gas is currently $1.92 a gallon, about 13 cents below the all-time record hit last May, and 22 cents higher than a year ago, according to the American Automobile Association. Furthermore, oil prices are at their highest level in months and still rising. The head of the Organization for Petroleum Exporting Countries has said crude could get as high as $80 per barrel, up from about $54 currently.
“All of the dynamics are in place for U.S. motorists to pay new record high prices again this year,” said AAA spokesman Geoff Sundstrom.
Oil prices are roughly 44 percent higher than a year ago, rising sharply in recent weeks due to a combination of colder weather, the declining value of the dollar and the world’s tight supply-demand balance. Instability in Iraq and underlying fears about terrorism have also played a part in the rally.
Gasoline future prices, which serve as a benchmark for most wholesale gasoline traded in the United States, hit an all-time high this week at the New York Mercantile Exchange, or Nymex, as problems at a number of U.S. refineries further added to supply worries.
It all adds up to a potential perfect storm at the corner pump, although the AAA’s Sundstrom said some gas stations “have overreacted to some of the media reports of $80-a-barrel crude and now the two-day run-up in the wholesale futures by posting 20-cent increases in their pump prices.”
Sundstrom said retailers should wait until they get supplies at their stations to see whether the price hikes seen on futures markets are fully passed through. Sundstrom said the AAA had reports of the 20-cent price hikes at pumps in Cleveland, Ohio.
An analyst with the U.S. Energy Information Administration, the statistical arm of the Department of Energy, said he would not be surprised if prices broke the record this year, but added that it’s not a given.
“We may never see today’s record Nymex gasoline price translate into a record retail price because the Nymex price represents New York Harbor reformulated gasoline, and a lot can happen by May or June, when we are looking for a peak,” said Mike Burdette of the EIA.
The record average retail price as counted by the EIA is $2.064 a gallon, recorded in late May 2004.
This may all seem like gloomy news for the average American motorist. But while gasoline prices are near record highs in nominal terms, when adjusted for inflation they are still well below the roughly $3-a-gallon peak seen in 1981.