Pump Prices in Uncharted Terrain
Gasoline prices hit a new high in California on Friday as crude oil futures cruised into record territory on Wall Street -- raising the prospect of even more pain to come for motorists.
The statewide average pump price for regular was $2.453 a gallon, second only to Hawaii’s as the highest in the nation, according to the AAA’s latest gas price survey. The price topped the record of $2.446 set Oct. 21.
On the New York Mercantile Exchange, crude oil for May delivery jumped $1.87 to $57.27 a barrel, eclipsing the record of $56.72 set just two weeks ago.
And gasoline futures rose more than a nickel a gallon to $1.715 on Nymex, bringing their gain over the last three days to almost 10%.
There was also fresh evidence Friday that skyrocketing energy prices were affecting sales of the large sport utility vehicles that have helped prop up profits at the nation’s biggest automakers. According to March sales data, sales of truck-based SUVs were down about 14% compared with a year earlier, even as overall vehicle sales rose 4.6% during the same period.
Because changes in gasoline prices generally follow changes in the cost of crude, motorists can expect even higher prices as the spring and summer travel seasons approach. Friday’s price rise could add a dime or more to retail gasoline prices over the next few weeks, said Tom Kloza, chief analyst for the Oil Price Information Service.
In some areas in Los Angeles and Orange counties, motorists are paying up to $2.65 a gallon for regular, according to the website Gasbuddy.com, which posts the prices at individual stations.
Nationally, the average price for regular is $2.164 a gallon, also a record, the AAA said.
The surge in oil prices is being driven by fears of shortages as demand continues to rise in the face of record pump prices, analysts said.
Demand for gasoline is up 2% in the last year nationwide even as pump prices have jumped almost 24% and oil prices have climbed 67%.
The run-up in prices also suggests that both speculators and big commercial users such as airlines are scrambling to lock in prices in case the upward trend continues.
Investors and big oil users “are unconvinced that we can supply future demand,” said Mark Baxter, director of the Maguire Energy Institute at Southern Methodist University.
A report earlier this week by a Goldman Sachs analyst warning that crude could hit $105 a barrel by 2007 has added to market fears.
The report, greeted with skepticism by many industry experts, said the triple-digit price was the level oil would have to reach to curb demand.
But Baxter said Friday’s market move provided evidence that price hikes might come even faster than he had expected.
“A few days ago I said that I wouldn’t be surprised to see oil hit $60 to $70 by the end of the year,” he said. “It might be a lot sooner now.”
Kloza, though, said he didn’t believe prices would continue to rise: “The second half of the year will bear little resemblance to the first. I’m not convinced it can keep going up.”
Historically, Kloza said, “it has not been unusual to see these
“We’ve had Memorial Day weekends when gas was cheaper than on April Fools’ Day,” he said.
For the short term, though, the recent surge in gasoline futures means average U.S. pump prices are likely to hit $2.25 a gallon within a few weeks and could hit $2.60 in California, Kloza said.
That could be bad news for automakers that rely heavily on the sales of SUVs.
Not all agree that gasoline prices are affecting sales -- General Motors Corp. market analyst Paul Ballew insisted Friday that a surge in large pickup truck sales at both GM and Ford Motors Co. argues against a gasoline price revolt against big trucks.
But others, including Ford sales analyst George Pipas, do see a correlation.
Gasoline prices, Pipas said, “probably are playing a role in accelerating the trend” of budget-conscious consumers’ shifting from Ford’s large SUVs such as the Expedition to its smaller, car-based “crossover” models such as the Escape.
Analysts note that motorists can take some comfort, however slight, in the fact that gasoline prices remain well below their inflation-adjusted highs of the early 1980s. Gasoline that was selling for $1.35 a gallon 25 years ago would cost $3.20 in today’s dollars.
