Gasoline may hit $3 soon

Published 6:28 pm Wednesday, April 7, 2010

As the nation’s economy improves and people spend more money, gas prices scoot up right along with it.

The national average at the pump is $2.84, and it continues to rise daily. AAA Public Relations & Marketing Manager Clay Ingram said Alabama isn’t feeling the worst of it with a state average of $2.74, though the price should hit $3 relatively soon.

He said prices are expected to increase between now and summertime, the peak point coming around Memorial Day weekend.

“We’ll see prices continue to creep upward,” Ingram said. “But I don’t think we’ll see any major spikes at any point this year like we saw over the past five years.”

Ingram said although the demand is increasing, which is a normal trend this time of year, it is actually soft compared to previous years. Inventories are high around the country, and refineries are only operating near 80 percent of their normal capacity.

“Should our demand spike unexpectedly — and I don’t think it will — I think our inventories and potential to expand our production capacity will be able to absorb it,” he said.

He explained that when the economy is on the upswing, people spend more money and production and transportation of goods goes up. That all requires substantial amounts of energy, and that demand causes crude oil and gas prices to increase.

“That’s one of the more simple parts of the process that tends to get overlooked,” Ingram said.

But as those prices soar and less people can afford to pay them, the economy suffers.

When gas prices sailed past $4 at the end of summer 2008, consumers had no choice but to cut back on spending. As people lost jobs and stopped driving to work, things snowballed in a bad direction.

“That’s one thing that pushed our economy into the tailspin it went into,” Ingram said. “It was way overpriced based on our demand. It was a byproduct of our overpriced fuel and energy commodities. Hopefully, we’ve learned a lesson from that.”

He said companies shouldn’t have artificially inflated those prices.

With prices quickly approaching $3 per gallon, crossing that barrier seems a foregone conclusion by now.

“We’re not too far from it now, so I think it’s a good possibility we’ll break that barrier,” he said. “If not, we’ll get awfully close to it, but if we do, it won’t be by much.

Ingram said there’s something about having a three on signs instead of a two that affects people and their decisions to consume gas. They start making a conscious effort to cut back, combine errands, eliminate more trips and drive more fuel-efficient vehicles.

While AAA does not attempt to go too far into predicting gas prices, Ingram said drivers shouldn’t rule out ever seeing it fall below $2 again.

“That’s certainly a possibility, but I don’t know that I could say it’s likely,” he said. “There were a lot of people two years ago when we were up to $4 per gallon who said there was no way it would happen. Three months later, it was back to $1.69. It’s in the realm of possibility, but it depends on what our demand and economy does.”

As of Wednesday, the crude oil price was over $86 per barrel.