Posted 9:21 am Tuesday, February 21, 2012
Fuel Prices Up 6 Cents Per Gallon In Past 2 Weeks
By TIM MONZINGO
Staff Writer
Staff Writer
Bit by small bit, events more than 7,000 miles and an ocean away are digging into the pocketbooks and bank accounts of East Texans.
A report by AAA released last week shows fuel prices have climbed up 6 cents per gallon in the past two weeks, pushing the statewide average to $3.45 a gallon.
And prices aren't expected to stop there, AAA spokeswoman Sarah Schimmer said Monday.
"There's no way to predict how the market's going to go," she said. "We know that prices are going to continue on an upswing. We're not sure how high prices are going to go or how fast they're going to get there."
In 2011, gas prices peaked before the Memorial Day weekend, she said, which is one of the five major travel weekends for drivers. The others are Fourth of July weekend, Christmas, Thanksgiving and Labor Day.
For that year, Americans spent a total of $481 billion on gas, averaging around $4,000 a household, she said.
Mrs. Schimmer said seeing the numbers on gas station billboards has a psychological effect on drivers.
Psychology doesn't stop just with the drivers, though. Some experts say it's a major driving factor in the cost of fuel itself.
Dr. Harold Doty, dean of the College of Business and Technology at The University of Texas, Tyler, said psychology plays a major role in petroleum markets before it ever hits a driver's tank.
That's been the case with tensions over the Gulf of Hormuz between Iran, Europe and the United States in recent weeks, he said.
"The announcement (of a petroleum embargo between Iran, France and Britain) shouldn't have had as big an effect on current prices as it did, except that it's the psychological effect," he said. "The current fluctuations in the last couple of days are a psychological effect, not a real market effect."
Pressures over access to the gulf mean the oil market is flooded with fear of instability, he said, which drives prices up.
The uncertainty of the availability of reserves in the world's fourth largest oil producer has had a market effect over the last several weeks as economies in Europe and the United States appear to be getting better, he said.
Doty said the Iran situation is just the most recent occurrence that's contributed to rising fuel costs. Refinery closures in the United States, both temporary and permanent, and low demand also have caused the numbers on signs at local filling stations to go up.
"All of that's going to have an upward effect on the price of gas. It's going to $4 a gallon (or more) in Tyler, is my prediction," he said. "I don't think the average will go to $5 unless something really goes crazy on us."
He estimated prices could climb as high as $4.25 a gallon before they start dropping again.
Still, he said the spike may not have a severe impact on Americans' lives and their travel habits.
"I think last time gas prices hit $4, it was a huge shock on us," Doty said. "It's happened before, so it's not as big a shock, so it'll have less effect."
Gas peaked last July at $3.48, according to AAA's report. That was a record-setting high in the state.
What is a source of concern is the impact the change may have on the country's economic recovery.
Americans right now have more money in their pockets for discretionary spending, but rising fuel costs could put a damper on that, Doty said.
He doesn't think it's all bad news, though. Earlier this month, China criticized embargos by the Middle East to the West. It's a subject on which China and the United States agree.
"The Chinese don't want to mess up the European crisis with an energy crisis, especially with the debt crisis going on," he said, noting that an energy crisis in Europe also would hurt the Chinese economy.
Last year, AAA conducted a study going into the spring to determine at what price people would seriously start considering changes to their travel habits, Mrs. Schimmer said. That number fell between $3.50 and $4 a gallon.
"For so many people, that is a psychological benchmark," she said of the low end of that spectrum.
AAA plans to conduct a similar study this year, she said.
"It'll be interesting to see if that same price point holds true for this year," she said.
