Leaping Gas Prices Have Drivers Hitting the Brakes

Gasoline pump pricesAs national gasoline prices shoot higher each day, signs of motorists rationing gas purchases have begun springing up around the country. The national average for a gallon of unleaded regular gas hit $3.37 on Monday. But In the key auto state of California, prices have already spurted past $3.75, which many analysts believe is a key threshold that could begin to hurt the U.S. economy.

Tom Kloza, chief oil analyst at the Oil Price Information Service, says he expects gasoline prices to keep rising into the $3.50 to $3.75 range nationally, with the peak likely to be hit between March 15 and May 15.

"There is a tremendous amount of money being made by people who are invested in oil," Kloza says. "There has been a panic among buyers, particularly in the speculative crowd."

"We Will Meet Any Shortage"

Crude prices appear to have stabilized on Monday, although rioting in Oman, the Persian Gulf's largest oil exporter outside of the OPEC (with about 880,000 barrels of daily output), made Middle East experts increasingly uneasy about the possibility that violence could spread next door -- to Saudi Arabia.

The markets have been in tumult since an uprising in Libya against the rule of Col. Moammar Gadhafi led to a sharp reduction in the country's oil exports, normally about 1.5 million barrels a day.

Saudi Oil Minister Ali Naimi told a forum in Riyadh on Monday that his country is prepared to use its spare capacity to substitute for oil production lost in Libya. "We have enough credence to tell you that we will meet any shortage," Naimi said.

While that has temporarily calmed international markets, it hasn't stopped the steep increase in prices at U.S. gas stations as retailers catch up to soaring wholesale prices. And consumers are feeling the sharply higher fuel prices, says Joseph H. Petrowski, CEO of Framingham, Mass.-based Gulf Oil.

"Less Discretionary Driving"

Petrowski says in Florida, where the company has 100 service stations from Boca Raton in the south to Orlando in the north, sales are down 3% to 4% after prices went up to $3.40 a gallon. In the Northeast, sales are also off, but to a lesser extent.

"When we asked managers what the reason was, the No. 1 response was less discretionary driving," Petrowski says. "That's usually a sign that instead of driving 20 miles to a restaurant, retired people are driving around the corner."

The average sale nationally has fallen from 11.5 gallons to 11.1 gallons, and customers are shifting from branded products to unbranded, he says. Another indicator that consumers are being hit in the pocketbook is that more sales are in cash rather than credit cards, which he says is a sign that credit is being maxed out.

"There are some small signs that rationing of gasoline is definitely going on," Petrowski says. "We're seeing signs of distress as the gas price goes to $3.30." But he adds that things still aren't as bad as in 2008, when prices hit $4 a gallon.

Petrowski says an increase to $3.75 nationally, as Kloza and other analysts predict, could impose a huge financial burden on many drivers. He says in Massachusetts, for example, the average family uses 1,500 gallon of fuel per year. At $3.75, a $1 increase over last year, the average family will be spending about 25% of its discretionary income on the gas hike, he says.

"I don't think the bottom 60% of wage earners can handle $3.75 gasoline without a serious cutback in their expenditures, and that to me is a problem," Petrowski says.

Don't Blame the Station Owner

He added that most gasoline retailers own five or fewer stations and have seen their profit margins fall from the range of 15 cents to 18 cents a gallon to under 10 cents. Most station owners gross about $180,000 a year but must pay labor and other costs.

"I think that's going to get cut in half for a period of time," he says. "If [the price of gas] were to stay there, there's no way you can run a modern site making only $90,000 on fuel. You really do need more income."

So don't get angry at the station owner. Get angry at the oil producers who are reaping their greatest profits in years. "Gasoline retailers aren't doing well under this scenario," says Kloza. "They like it when prices fall like a rock."

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There is plenty of oil, this is just an excuse to make money off us, WE need to get off the oil addiction period. Whats it going to take for us to wake UP? $8 a gal? bread $5.00 eggs $10? the consumtion has go to stop, to lower the prices.

March 07 2011 at 10:25 AM Report abuse +1 rate up rate down Reply

We would not be in this mess if Obama and his Liberal cronies would lift all the bans on drilling and actually issue permits (some bans have been lifted but not one permit issued). We have 100 TIMES more oil than all of the Middle East located in the GREEN RIVER VALLEY! Yes, this oil is captured inside shale but, we now have the technology (actually for 5 years now and Bush tried to get it but congress blocked him) that would enable us to get this oil out and not harm the land via a new microwave drilling technique. Whats more is that because there is so much natural gas in the area it could be drilled and pumped at the same time and the drillers could use some of this natural gas to power their equipment which in turn would lower their operating costs! Just from this oil source alone the Oil Speculators said that every American could be paid a few thousand dollars annually year after year just like the citizens of Saudi Arabia and the profits from this oil and natural gas would be enough for our nation to wipe out the huge ever growing deficit! Wouldn't that alone be worth the effort? If we would tap this oil plus what is in ANNWAR and right off our shores we could not only buy time but we would have the extra money to invest in a truly sustainable energy alternative (this means thousands of jobs will be created from drilling and alternate energy development right here in America), and we could topple the infamous OPEC's power base and stop them from controlling oil prices and balckmailing the world whenever they feel like it! WRITE YOUR CONGRESSIONAL REPRESENTATIVES & SENATORS NOW AN DEMAND THEY STOP DRAGGING THIER BUTTS ON THIS ISSUE & FREE AMERICA FROM BANKRUPTCY!

March 02 2011 at 11:07 AM Report abuse rate up rate down Reply

why aren't more people bashing obama over the rising gas prices like they did bush. as in 2008, there is no shortage of oil.

March 02 2011 at 6:24 AM Report abuse rate up rate down Reply
1 reply to renaldo1949's comment

Gee Renaldo, I guess you haven't been censored yet by the lib AOL paid bloggers, go ahead write something

March 02 2011 at 9:33 AM Report abuse rate up rate down Reply

weedpatchxlies your wrong gas prices should not go up the same day oil goes up it takes at least 6 monthes for oil pumped out of the ground to be refined and get to the pumps it is price gouging at its best plus there is no price regulation on gasoline

March 02 2011 at 5:51 AM Report abuse rate up rate down Reply

No jobs, gas prices heading to $4.00/gallon, food prices on the rise, clothing prices on the rise. You are witnessing the demise of the middle class of which I am one!

March 02 2011 at 4:45 AM Report abuse rate up rate down Reply

Instead of listening to nitwits posting that we should conserve and cut our energy costs by 20%--I say call or email or write your Congressmen and scream loudly that you want them to allow further exploration and to open up our own oil fields so that we are no longer held hostage to these foreign countries. The environmentalists who are so concerned with the planet should go to China & India and use their talents to reduce the pollution there. Wind, solar, ethanol may be our future for energy--but we are not there yet and until we can economically depend on another form of alternative energy, drill, baby, drill.

March 02 2011 at 2:10 AM Report abuse +1 rate up rate down Reply
1 reply to okitori's comment

I did that yesterday, the oil is in Alaska, Oklamhoma, Texas, the Gulf, but the dipsticks are in Washington d.c.

March 02 2011 at 9:34 AM Report abuse rate up rate down Reply

Let's put the blame on Obama--he refused to allow drilling off the coasts as well in Alaska--had we begun our own production 2 yrs ago we may not be facing exorbitant gas prices now. Obama wnats to tranform America and that includes his efforts to subsidize solar, wind, ethanol (all on our dime) so that we can abide by his idealogy. Global Warming (oh--since they couldn't prove a warming, they changed the name to Climate Change) in the hopes that many Americans don't pay much attention and they can slip it through. We have alrady been warmed that energy costs will sky rocket--and yes he is right on that campaign goal.

March 02 2011 at 1:59 AM Report abuse +1 rate up rate down Reply

Yesterday the government finally approved an offshore drilling rig since last year's spill. Who do the oil companies think they are? "Last year we were too easy on people after that, now it's time for revenge." They will use any B.S. excuse to justify the increase in prices (ex. Libya Crisis, Oil spill, War costs etc. you name it). Here are some suggestions to halt their greed.

1. President Obama should tap the SPR NOW!
2. President Obama should sign an executive order to permanently end the tax cuts for the rich NOW! (Those Republicans had their way for too damn long)

3. The federal government should expedite SAFE offshore drilling projects NOW!
4. Congress should pass energy market legislation to limit the price of crude oil and gas (oil: $55-$70) (gas: $2.00-$2.50 a gallon) NOW!

5. Congress should also close all loopholes that taxpayers give to oil companies NOW!

6. Keep investing in clean energy technologies NOW!

When gas reached $3.00 a gallon three months ago, that should have been a sign to do something THEN AND THERE! Now that the events in Tunisia, Egypt, and Libya, and possibly Saudi Arabia are going on, politicians talk about energy legislation now. Come on this should have been done months and decades ago, instead of repealing Don't Ask Don't Tell. The lesson here is that politicians SHOULD NOT, I REPEAT, SHOULD NOT wait for a disaster to happen in order to act. I WANT ACTION NOW! THIS COUNTRY CANNOT WAIT ANOTHER DAY, WEEK, MONTH, OR YEAR! CLEAN ENERGY AND ENERGY MARKET REFORM NOW!

March 02 2011 at 12:57 AM Report abuse -1 rate up rate down Reply
1 reply to Eric's comment

a day late and a dollar short

March 02 2011 at 9:35 AM Report abuse rate up rate down Reply

to weedpatchxlies: cite your sources if you can, please.
can you find one credible quote to back your claim that presiden tobama said he wanted gas to be 7 bucks a gallon??? and i do not mean some fake chain e-mail lie kind of quote. i mean a real one.

March 02 2011 at 12:13 AM Report abuse -1 rate up rate down Reply
2 replies to shopknuckleheads's comment

Im not going to do YOUR research. Do it yourself, Obama koolaid drinker.

March 02 2011 at 12:35 AM Report abuse +2 rate up rate down Reply

The Obama bashers always find it easier to just quote some random idiot stuff from others that want to do nothing other than to discredit him out of their own hatred. It isnt a question about being right or wrong, it is just a question that someone other than Obama is not President. Then they run out and buy more Palin stickers for their Mercedes.

March 02 2011 at 11:08 AM Report abuse rate up rate down Reply

Why isnt the loony left holding Obama accountable for high gas prices as they did George W. Bush???

March 02 2011 at 12:06 AM Report abuse +2 rate up rate down Reply