We knew it was too good to last, those oh-so-brief sub-$2 gas prices, those happy, heady days when we could fill the car’s tank for $20 less than when we were paying well north of $3.
After nine straight months of declines, in just the past month in the area where I drive, pump prices have risen 40 cents. And we’re not talking 1-cent or 2-cent jumps — in only one day this week, the price rose 10 cents. Today, at Wally World and Kroger, the usual low price leaders, $2.39.9. By the time this hits your mailbox, who knows?
Oil prices have already reached a record high for 2015, and with the summer driving season at hand, further highs are likely.
Each 1-cent increase in pump prices sucks an additional $1.2 billion out of drivers’ pockets, industry analysts say, and that ripples throughout the economy.
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While lower oil prices over the past several months have brought savings at the pump, and lower transportation costs for goods and services, consumers have seen little or no reduction in prices at retail. Airlines, which have seen profits soar as a result of cheaper fuel, reduced ticket prices an average of only 66 cents, at the same time figuring how to stuff even more seats into already crammed-full planes and dreaming up new charges (about the only thing they haven’t done — yet — is install pay toilets).
Rising gasoline and housing costs were the chief reasons for back-to-back increases in the Consumer Price Index in February and March. Prices were up for new and used cars/trucks (cheaper pump prices brought a resurgence in purchases of gas guzzling SUVs and big pickups), medical care, apparel items, and household furnishings.
Farmers are, of course, large users of diesel and gasoline, and lower fuel prices have been welcomed by them, but the turn back upward comes when lower prices for crops and rising costs of other inputs are putting the squeeze on profit potential for 2015.
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Underlying this yo-yoing of oil prices, we’re told, is a struggle by OPEC to maintain dominance in world energy markets and to do everything possible to thwart the ascendancy of the U.S. as its leading competitor in oil production.
The back story on the cheaper gas prices we’ve enjoyed the past several months is that OPEC, by cutting prices and increasing its production, is trying drive U.S. oil producers out of business. Some U.S. drillers have, in fact, stopped or significantly curtailed operations.
OPEC’s challenge will be to find the price point at which it can be top dog without there being enough profit for U.S. drillers to