No Threat Of $4-Per-Gallon Gas, But Prices Will Top $3 Soon

March 11, 2010
Gas At $4.89

Gas At $4.89

Gas prices keep creeping upward, but don't expect any relief anytime soon. Don't expect $4 either.

That's what the federal government warns in its latest monthly report; the U.S. Energy Information Administration has predicted that gas prices will jump well past the $3-a-gallon mark in much of the country this spring and summer—up to a national-average $2.84 a gallon for this calendar year.

The price climb that we're seeing now might be the beginning of a trend that lasts through the summer, experts say.

U.S. average pump prices are up about five cents a gallon for the third week in a row, to about $2.75 a gallon as of March 8. That's up 81 cents versus a year ago.

According to AAA, national-average prices have risen seven cents in the past week, from about $2.71 to $2.78.

Pump prices remain highest in West Coast cities, where they've already been topping $3.00 for some time. Los Angeles and San Francisco are both around $3.07 a gallon and Seattle nearly $2.94. Statewide, California averaged almost $3.05 a gallon. Gas in the Gulf Coast states remained cheapest, at less than $2.65, with prices in Houston just $2.56.

With vehicle miles traveled remaining quite flat (they're still down three percent from 2007)—due in part to a high unemployment rate—the lower demand will help keep prices under control, noted a source to USA Today.

As gasoline prices crept up, oil prices settled down slightly to less than $82 a barrel this week. They're expected to be quite stable, rising to $85 a barrel only by late 2011. Also due to the lowered demand, U.S. refineries are at about 14 million barrels of crude per day but have a total capacity of 17.7 million.

Gas prices have been rising rather steadily since January 2009, as we reported last month, yet data from several sources, including AutoPacific, has suggested that consumer interest in small cars might be waning. After falling nearly to the $1.60 mark then, the price of gas has risen more than a dollar a gallon since.

There's a host of new small-car models ready for introduction this year, including the 2011 Ford Fiesta and 2011 Mazda2, and the 2011 Chevrolet Cruze, so the timing is a little off. Even more small-car models, like an all-new 2012 Ford Focus, arrive in calendar-year 2011.
The key to understanding why consumers don't feel as concerned could be that there haven't been the extreme price swings (volatility) of the past. By now most drivers don't seem to change their habits at $3-a-gallon gas, but the $4 mark, as we saw for a time in 2008, shocks some drivers and shoppers into panic mode.

Right now, it doesn't look like we'll have to deal with another $4 shock anytime soon.

[USA Today]

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