U.S. fuel prices now stand at an average $3.80 a gallon for regular unleaded, according to the latest pump survey by AAA, with prices topping an average $4.00 in four states.
The pace of the increase has actually slowed, in recent days, and even dropped briefly last week. But analysts anticipate that fuel prices could continue their run-up in the days and weeks ahead, especially as spring approaches and American motorists begin traveling more.
Despite concerns about the impact of rising petroleum prices on the economy, many economic indicators have continued to improve, in recent weeks, car sales, in particular, rising at a much faster rate than anticipated. February’s double-digit surge was significantly better than anticipated and, on an annualized rate, reached the highest level the U.S. market has seen since March 2008.
Some analysts, in fact, are speculating that the latest fuel price surge might actually be helping the auto industry by driving more motorists into showrooms for small cars. Demand for compact and smaller vehicles surged to 23% of the overall U.S. market in February, up from 17.9% in December.
“If people are looking to replace their vehicle they’re short penciling the fuel economy numbers,” said Joe Phillippi, of AutoTrends Consulting.
But Phillippi cautioned that “there may be a delayed reaction to the fuel price run-up” that, if it continues much longer, could lead to a slowdown in not only car sales but the overall economy.
Monday’s $3.80 average is nine-tenths of a cent above last week’s final average – and compares with $3.51 on this date a year ago. It’s still 31.3% behind the all-time $4.114 average recorded by the AAA on July 17, 2008.
But there are a number of forecasts predicting the price of a gallon of regular self-service unleaded could reach $4.50, perhaps even $5.00 in the coming months as demand for fuel traditionally rises.
The price has already hit $4.00 in Alaska, California, Hawaii and Illinois – the Hawaiian islands recording the nation’s highest pump price at an average $4.44 per gallon, the AAA said. In five other states and the District of Columbia, fuel prices are within a nickel of the $4 mark.
The lowest price in the nation can be found in Wyoming, at $3.30.
The fuel price surge is being blamed on a variety of factors, including Mideast tensions and the fear of a war with Iran over the Islamic republic’s nuclear program. Iran has complicated matters by already cutting off supplies to several parts of Europe, including the U.K.
Ironically, the resurgent U.S. economy has also encouraged the upward trend in fuel prices – as has the strong economic boom in China. In fact, most petroleum analysts argue that fuel prices are no longer primarily set by U.S. demand.
The surge in prices is nonetheless becoming a key issue in the U.S. presidential race, the various GOP contenders blaming Pres. Barack Obama for the run-up. Fading GOP candidate Newt Gingrich has tried to revive his own fortunes by promising to lower prices to $2.50 a gallon if elected. The former House Speaker has declined to outline how he would achieve that, however, and few believe that even an all-out drilling binge would be able to move the needle at the pump much for several years.