Rising gas prices eating a hole in consumers' wallets
Published: Monday, January 16, 2012 at 8:17 a.m.
Last Modified: Monday, January 16, 2012 at 7:03 p.m.
Rising gas prices have left Janeice Williams and millions of other Americans with less disposable income this winter compared to last.
Average unleaded gas prices in Florida
Current – $3.457
Week ago – $3.438
Month ago – $3.285
Year ago – $3.133
Williams, who figures she buys about a tank of gas a week, said she spends about $3 a week more than she did a year ago.
Gas costs about 30-cents a gallon more now than it did last year at this time in Florida, according to AAA Auto Club South. During the past week, gas prices statewide rose by about 2 cents and are expected to remain at their current levels or fall slightly over the next week or so.
Those increases go straight to the bottom line for drivers.
Consumers also are impacted because higher gas prices translate into more expensive costs for everything from airline tickets to products shipped by truck and services that add fuel charges to their bills.
On Monday, Williams was at the Scrubs Carwash at 3135 SW 42nd St. spending a few dollars to pay for the weekly automatic car wash for her nearly 10-year-old Toyota Camry. She also sets aside some money every month to handle minor repairs and maintenance costs on her aging but clean car.
"I know it may seem silly, but I've always thought that when you keep your car looking good, it will keep running good," said Williams, who is from Gainesville. "And really, if you have to pay these higher gas prices, how are you going to be able to afford car payments, too?"
In the car wash bay next to Williams, Jose Qiano, a self-employed yard maintenance worker, said he is certain gas prices will go higher, so he wants to wait before raising prices for his regular customers.
"Everything I use takes gasoline, but if I raise my prices a little bit every time gas gets higher, what are my customer going to think? They are just going to think I want more and more money from them and they will start looking for someone else," Qiano said.
His strategy is to wait until prices hit about $3.60 a gallon before he raises his rates.
Qiano may not have long to wait.
The website GasBuddy.com has predicted the following periods as the points when the biggest gas price swings are likely to happen in 2012.
April 15 through May 31: Refineries begin producing cleaner burning summer gasoline and perform maintenance. Problems typically arise from plant restarts and low supply of federally mandated blends.
August 1 through Sept. 15: Hurricane season has brought significant harm to oil infrastructure in the last decade, and while hurricanes are not guaranteed to impact such facilities, such an event could interrupt notable infrastructure: Louisiana Offshore Oil Port (LOOP), Gulf Coast refineries, Strategic Petroleum Reserve, Offshore oil drilling. The fear of a storm impacts oil prices.
Oct. 15 to Nov. 15: Winter gasoline phase-in will likely lead to some downward direction, but also could result in some volatility surrounding refinery maintenance. This time frame likely will see lower volatility in prices compared to the previous two time frames listed.
Analysts for AAA said oil price dropped to less than $100 a barrel last week when tensions between Iran and Europe began easing.
European Union leaders said they were considering a six-month delay in sanctions on Iran to give member nations time to find alternative oil supplies. Iran had been threatening to block the Strait of Hormuz, the waterway where 17 million barrels of oil a day are shipped out to the world.
"As long as tensions with Iran are easing, oil prices should remain below $100 a barrel," AAA spokeswoman Jessica Brady said. "Consumers should start to see pump prices stabilize and may even see prices fall in some areas if a barrel of oil continues to trade below $100 this week."
Meanwhile, analysts at GasBuddy.com said in a news release that drivers will likely see extreme volatility in gas prices this year.
"While the 2012 outlook isn't what I'd call rosy, we can look to Europe at their $6-$9 a gallon gasoline and be happy that we're still not paying as much as some countries," Senior Petroleum Analyst Patrick DeHaan said. "2012's Iran situation isn't 2011's Libya situation — not by any means — it's far worse.
"Consumers who think the Iran situation is over-hyped clearly don't understand the high stakes behind not only the Strait of Hormuz, but behind Iran's feud with the West," he said.
Also not to be ignored is the role that speculators play in determining the price of oil.
According to the Commodity Futures Trading Commission, 70 percent of the contracts for future oil delivery are bought by financial speculators, typically investment banks and hedge funds, who try to sell the contracts for profit and in the process drive up the cost of oil. That leaves 30 percent to be purchased by buyers such as airlines, which actually intend to use the fuel.