WASHINGTON, D.C. — The Energy Information Administration (EIA) predicted in April that gas prices will remain high throughout summer, averaging about $2.28 per gallon nationwide for unleaded regular.
That’s up about 38 cents from 2004 — a 20% increase — which surely isn’t great. But as bad as it seems, if prices were adjusted for inflation, the cost of gas actually peaked in March 1981, when the national average hit $1.42 per gallon, as recorded by the Federal Energy Information Administration. In 2005 numbers, the national average for gas would have to reach $2.99 to break that record.
If the EIA is correct and fuel prices hover around $2.28 per gallon this summer, a 500-mile trip in an 18-mpg SUV would add $10 to fuel costs over last year — $63 this year, $53 last year. A 5,600-mile round trip between New York City and San Diego would go up $118 in the same vehicle — $709, up from $591. Averages in all 50 states and the District of Columbia surpassed $2 for the first time in April.
Because of these increases, nearly half of U.S. adult consumers shopping for a vehicle in the next several months have said they are giving serious consideration to models that they would not normally have looked at. According to market research from Harris Interactive and “Kelley Blue Book,” fuel efficiency is now among the top deciding factors.
An additional 30% of those polled said they would lean toward a more fuel-efficient vehicle if gas prices continue to rise, bringing the total percentage to almost 80%.
Two of the chief manufacturers of large SUVs — Ford and General Motors — both saw a sales decline in that segment as gas prices rose in March. Many large SUV buyers have been choosing small or mid-sized SUVs.
Eight percent of consumers have said they are giving real consideration to gas/electric hybrid vehicles such as the Toyota Prius or the Ford Escape Hybrid. Another alternative — “new-technology” diesel — includes the Mercedes E320 and the Jeep Liberty, which deliver between 30 to 40 mpg.
State-by-state gasoline price averages are available from AAA at: http://www.fuelgaugereport.com/sbsavg.asp.
· More than 84 million barrels of oil are consumed worldwide each day.
· A high demand worldwide, cold weather and fears of tight supplies pushed oil prices higher in early spring.
· An influx of speculators moving money from stock and bond markets into oil drove prices higher still.
· OPEC played a role in pushing up prices by cutting production even when oil was trading at $40 per barrel, which was the cost a year ago.
· A supply disruption could cause shortages because oil companies have little ability to pump additional oil from the ground.
· Oil is traded in dollars, which has been dropping against the euro.
· The impact all of this will have on interest rates and the economy is still uncertain. High oil prices can contribute to slowing the economy, which may call for lower interest rates. But high prices also spur inflation, which would call for higher interest rates.