Record high gasoline prices likely this year

By SARAH FAY CAMPBELL
sarah@newnan.com
Crude oil prices have actually gone down a bit in the past few days — but don’t expect them to go down much further.

Predictions are for average gasoline prices in the U.S. to reach an all-time high this year — thanks to a wide variety of factors.

The most important factor right now is uncertainty over what will happen between Iran and Israel, said Gregg Laskoski, senior petroleum analyst with Gasbuddy.com.

The Georgia state average price for regular unleaded was $3.835 on Thursday, according to AAA’s fuelgaugereport.com website, which tracks gas prices. That amount was up from $3.818 the day before, and $3.761 a week ago.

In Newnan, gas prices at some stations actually dropped Thursday. Regular unleaded was $3.799 at RaceTrac on Bullsboro Drive, down from $3.819 on Wednesday.

So Cowetans heading out of town for spring break might see a bit of relief. The Coweta County School System has its spring break next week.

There hasn’t been much news out of Iran and Israel in the past few weeks, Laskoski said. “The financial analysts apparently see that as good news — no news is good news,” he said.

“So we saw crude come down this week a couple of dollars a barrel,” Laskoski said. “But American consumers are still looking at extraordinary high gas prices and we’re not even into April yet,” he said.

GasBuddy had made some predictions in January, but because of the continuing rise in prices, it recently went back and revised those predictions. As of right now, it’s predicting that, in Atlanta, gas prices will peak somewhere between $3.90 to $4.20 a gallon, and the peak will probably occur in May, Laskoski said.

After the peak, then what?

“While we could hit the peak and possibly come down slightly off the peak, we don’t know how long we might be at an elevated price point, how long the plateau might extend,” Laskoski said. “We could come down off the record high” but still have very high gasoline prices for “a very long time,” he said.

Last year, prices stayed very high for a long time and the average American household “spent more than $4,100 just on gas,” Laskoski said. “In all likelihood, that number will be surpassed this year.”

Last year ended with the highest national average gasoline prices ever seen on Dec. 31, Laskoski said. The national average on Dec. 31, 2011, was $3.05, Laskoski said. In 2010, it was $3.05. In 2009 it was $2.64, and in 2008 it was $1.61.

And that doesn’t bode well for prices the rest of the year. “The typical movement, from the beginning of the year to the peak price, whenever that peak occurs, has been $0.93,” Laskoski said.

Things got really bad after Defense Secretary Leon Panetta spoke candidly on “60 Minutes” on Jan. 29. In that interview, according to Laskoski, Panetta said he believed there was better than a 50/50 chance that Israel would attack Iran, and that it would happen in April, May, or June.

“When he said that, needless to say, anybody looking at oil futures... simply bet along with him that things were going to get worse,” Laskoski said. “That is why crude has remained above $100 a barrel as long as it has.”

“I guarantee you that the secretary regrets having said as much as he said publicly,” Laskoski said. “Because he basically set the table,” Laskoski said. “He is telling us there is a pretty good shot that there is going to be a war. Who would do anything else but invest in oil futures?”

Other factors contributing to the high prices include supply bottlenecks on the east coast, and refinery shutdowns in Pennsylvania. Two oil refineries have already closed in Pennsylvania, and Sunoco says that it will close another one if a buyer isn’t found by June, Laskoski said. Sunoco wants to get out of the oil refining business, he said.

The issue in Pennsylvania is that they don’t have access to cheap Canadian crude. Instead, the northeast relies on Brent Crude from the North Sea, which sells at a premium.

One thing that could help that problem would be the repeal of the Jones Act, according to Laskoski. The Jones Act was passed in the 1920s. It requires that any cargo that is transported from one U.S. port to another U.S. port must be transported on a U.S. flagged ship with an American crew.

“And, right now, there aren’t enough of those ships,” Laskoski said. If other ships were allowed to, they could carry low cost crude from the Gulf of Mexico up the eastern seaboard to refineries. That “would bring significant relief to consumers,” Laskoski said.

One thing that isn’t contributing to the high gas prices is supply and demand.

“We’ve seen consumer demand on the decline for the last 10 years,” Laskoski said. And supply in the U.S. is so good that, in 2011, the U.S. was actually a net exporter of oil and petroleum products. That means the U.S. exported more oil and gas than it imported from other countries.

“Last year, oil companies realized that, while U.S. consumer demand is pretty unremarkable, they could get much better profit margins by shipping overseas,” Laskoski said. “In doing so... they artificially reduced the U.S. domestic supply, while maintaining higher domestic prices to keep that higher profit margin.”



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