01-30-09
Unstable Gasoline Prices Pose Another Money Threat for 2009
People who were thinking that they had seen the last of high gasoline prices due to the drop in oil prices were in for a very unpleasant surprise as they got to the pump recently. Despite February contracts for crude oil falling to $35.50 on the New York Mercantile Exchange, the price of gasoline has jumped up as much as four cents per gallon in some regions of the country. This is causing people to spend more money at the pump. This instability of rising then falling then rising prices is wreaking havoc with motorists and the oil market at a time when economic factors are already in a weak state. If gasoline prices continue to rise in 2009, expect the prices of goods and services to also go up due to transportation costs. This could spell trouble for consumers, whose confidence in the economy is already shaken by last Fall’s economic meltdown and who are already trying to tighten the belt as far as money is concerned.
Many people are wondering why gasoline prices are so volatile and are going up when the price of oil plummeted to below $50 a barrel just weeks ago. Many industry analysts are quick to point out that while crude oil prices are an important factor in the price of gasoline, they are not the only factor. Oil companies who are hurt by the falling price of oil still want to turn a profit and make money and also make their balance sheets look good for their shareholders. There is also transportation, marketing and refining costs that contribute to the cost of gasoline, not to mention taxes, which vary from state to state.
While the market is volatile, some analysts point that the price of a barrel of oil will bounce back to $43 a barrel in March and many oil companies are banking on that now so they raise their prices. Rising prices mean people have to part with more money at the gas station. With oil prices being so volatile, the oil companies have to continue to raise gasoline prices to remain competitive and turn a healthy profit. While this may be good for the oil companies, motorists are really feeling the pinch at a time when the economy is not good to begin with and added price pressures can shake consumer confidence. With the price of oil expected to rise in the Spring, higher gas prices are inevitable, although most analysts do not think they will climb to the rates of last summer when price hikes were numbered in the dollars, not cents. Still, this can put a damper on people’s plans to spend money on a vacation or extended trip using their car.
What this means for 2009 is definitely a little more pain at the pump for motorists and for businesses that transport goods. People have to be prepared to part with more of their hard-earned money to fill up their gas tanks. Oil prices are predicted to climb higher because OPEC is planning on cutting production just before the big summer demand for gasoline. While the prices may not climb as high as they were before, the effect on the economy will be telling. With the recent economic downturn, any price hikes will definitely have an impact on motorists. They may think twice about taking extended trips in their cars because they are already trying to save money in other areas of their lives. When gasoline prices jump, so do the prices of milk, produce and other staples because of the transportation costs associated with them. For households on a shoestring budget already, a jump in food prices can be devastating. Businesses that are very dependent on transportation will be forced to increase their rates for services. Rate hikes are not good in a weakened economy and consumers may have to cut back more on spending money to accommodate the higher gasoline prices.
With the unpredictable rise in gasoline prices, motorists should be prepared to pay more money at the pump through 2009. Consumers should also be prepared for increases in prices of goods and services. How this will impact the economy remains to be seen, but with no clear recovery in sight, higher gasoline prices in a weak economy could be bad news for consumers and for certain industry sectors that rely on gasoline.
20 May
