It just wouldn’t be a holiday weekend if gas prices didn’t jump higher. This time, though, a new record’s been set. Gas prices, up by 9.4% in August, are higher than they’ve ever been in U.S. history, beating the record set in 2008.
The nine-plus percentage jump is the highest percentage we’ve seen in more than four years; still, experts say it’s only temporary and that a leveling off should occur over the next few weeks. That belief is what’s fueling frustration and sparking outcry from drivers around the nation; if it’s only temporary, then why raise prices at all? After all, there’s nothing indicative of justification for these higher prices. Granted, Hurricane Isaac wreaked havoc last week – but only briefly and with little effect on the oil industry.
Many Factors at Play
Tom Kloza, who is the chief analyst at the Oil Price Information Service, said there are several factors coming to together that lead to steady increase throughout August. He cites issues at many refineries, including a couple of fires at various facilities, the shutdown that occurred prior to Isaac’s landfall and global considerations. In fact, he said it’s the global issues that “lifted oil futures about 7% over the past month”.
Often, it’s a combination of both good and bad news that drive prices in many sectors, including oil. For instance, with growing beliefs that the Fed may step up to the plate with an injection for the U.S. economy has served as a bit of a stabilizer; however, fears over what happens next in Iran continue to rise. Specifically, analysts are worried about the sanctions imposed on the oil-rich company and what Iran’s leaders might do in retaliation.
While it’s not made for good feelings over the Labor Day holiday, prices should begin to lower again. Hurricane Isaac, though destructive, didn’t greatly affect any of the Gulf Cost refineries. That should result in a faster recovery into full operation of those facilities.
We were lucky. I think we really dodged a bullet,
says Andrew Lebow, senior VP of energy futures at Jefferies Bache.
Still, gas prices soared to as high as $4.79 a gallon for regular in some cities in the wake of Hurricane Isaac and there was no shortage of outrage from consumers, who said it was a clear case of price gouging.
There is no way this hurricane could affect the cost of gas right now,
said one driver in New York City a day after the storm made landfall. Gas stations were accused of exploiting the demand just before the Labor Day weekend.
Analysts also say the passage of summer will also serve as a reason to lower prices – and that should be happening by mid-September. Some of those analysts predict a twenty cent or more drop in gallon prices. If European concerns begin to ease, that too will drive prices down.
Higher than 2008
This year’s per gallon price over the Labor Day weekend surpassed even the Labor Day pricing of 2008, when gas could be found for $3.67 a gallon. According to the U.S. Department of Energy, the weekly average retail price of regular gasoline increased three cents to $3.78 per gallon. Prices increased in all regions of the country for the second time in the last three weeks. All regions except the Midwest saw a price increase of four cents. The Midwest average price is $3.78 per gallon, up two cents from last week. Prices are $3.75 per gallon, $3.58 per gallon, $3.58 per gallon, and $4.04 per gallon in the East Coast, Gulf Coast, Rocky Mountain, and West Coast regions, respectively.
With the various predictions and indicators justifying analysts’ belief, there is one significant wild card: the possibility that Israel will attack Iran’s nuclear facilities. If the U.S. plays along, the result could be catastrophic for many American families, as Iran has made it very clear the repercussions for those countries looking to weaken is resolve of producing nuclear weapons. Now, there are many calling for a release of oil from the Strategic Petroleum Reserve, even as AAA, along with other agencies, believe this is necessary. In a press release last week, AAA representatives said the Reserve is
designed to be a tool to protect American motorists from emergency disruptions to supply and distribution, not as a response to high prices due to non-emergency supply and demand market fundamentals. The impact on global supply caused by the Iran sanctions policy does not meet that condition at this time.
For now, folks are looking to their credit cards that offer discounts for buying fuel; still, even with the discounts, people are feeling the pain at the pump as frustrations continue to rise. Even the thought of a three day weekend isn’t soothing those frustrations, either. With the slow economic recovery, the upcoming holidays and the traditional “return to school” mode, every penny counts and seeing those pennies depleted as a result of higher gas prices that no one can explain is simply more than some can take.