Published Saturday, January 05, 2013
By SARAH FAY CAMPBELL
Consumers can thank those “successful” fiscal cliff negotiations for the rising cost of gasoline.
Just two weeks after multiple Coweta County area gas stations were offering regular unleaded for just $2.99, prices have skyrocketed, and the cheapest gas seen along Bullsboro Drive on Friday was $3.23 a gallon. Other stations typically recognized for cheaper gas prices were offering regular unleaded for $3.27.
A week ago, prices were around $3.09 at the cheaper stations.
As the fiscal cliff negotiations heated up, so did gas prices, and then once an agreement was reached, prices increased even more.
Before Christmas, crude oil was trading in the mid $80s, said Greg Laskoski, senior petroleum analyst with Gas Buddy. Friday afternoon, it was trading at $93.05.
“What pushed the price of crude, oddly enough, was the concern about the fiscal cliff,” Laskoski said. “And then, what is even more frustrating... even after the fiscal cliff issue was supposedly resolved, then oil analysts came out and said ‘well now that that issue is resolved, there is slightly more optimism about the economy’ — and that information pushed prices higher,” said Laskoski.
When it comes to the economy and gas and oil prices, “we can’t win. We simply can’t win,” Laskoski said.
If a fiscal cliff deal had not been reached, the country could have been plunged into recession, but at least that would have made gas prices go down, because of decreased demand.
The country’s debt problem will continue to be an issue for much of the year, when it comes to impacting fuel prices, Laskoski said.
That’s because current federal fiscal policies, which are designed to pump money into the economy, support a “weak” dollar, according to Laskoski.
“The reason is, if you have a weak dollar, you can diminish the relative value of the $16 trillion in debt that we have. When you have a strong dollar, you are increasing the relative value of that debt,” he said.
“What people aren’t realizing is exactly what that debt means to their own spending on a week-by-week basis,” he said.
“For consumers, that can be somewhat problematic,” Laskoski said.
“When you have a weak dollar, you’re almost forcing money into the commodities markets. The traditional investors want to look for a safe hedge against the weak dollar,” Laskoski said. Plus, because crude oil is priced in dollars, “as the dollar continues to weaken versus other global currencies, it is going to take more of our cash to buy the crude oil that we need to have refined,” he said.
“That means that when it is ultimately converted into gasoline, we will still pay more for that because we are buying that gasoline with weaker U.S. dollars.”
There is some good news in our energy future, and that is on the supply end.
“The U.S. is in the midst of an energy boom right now and so is Canada,” Laskoski said. “The Department of Energy is projecting that, in a number of years, we will be producing more oil than Saudi Arabia — we will be the world’s largest producer,” he said. There’s currently an oil boom in the Dakotas and in Texas. If the Keystone XL pipeline is built, the U.S. will have more access to Canadian oil. And Mexico has just announced it discovered a massive oil repository in the Gulf of Mexico that represents about 26 billion barrels of crude.
There is very positive news “about the strength of this commodity,” Laskoski said. “So we have to play our cards right,” he said.
“Even with the energy boom and with the fact that Americans are in the long-term trend of consuming less gas, because the cars they are driving are more fuel-efficient — even with all that, we could be looking at significant prices,” he said. “And a big part of the equation could be the impact of $16 trillion worth of debt and what that means to the dollar that is buying that oil.”
There’s one other major factor in gas prices.
“If 2012 taught us anything, it taught us exactly how vulnerable we are” in regards to America’s oil and gas infrastructure. In 2012, there were refinery problems in California, Washington, the Great Lakes region and the Northeast.
“Anytime there were refinery issues, we saw tremendous gas price spikes,” Laskoski said. “And these spikes lasted for longer periods,” he said. “That still remains one of the places where we have our greatest vulnerability.”