Painful Premonitions at the Pump

Written By Keith Kohl

Posted March 19, 2007

Dear Wealth Daily Reader,

Of all places to experience déjà vu, mine came to me at the gas station this weekend. Something tells me you might have had a similar feeling, too.

There I was, filling my tank at $2.50 a gallon, thinking that I’ll never again see gas this cheap. But then it struck me that I’d had this feeling before. I distinctly remember thinking the exact same thing years ago while filling up at my local Hess station for $0.99 per gallon.

Tell me, when was the last time you saw regular gasoline for under a buck?

As winter turns into spring, I realized something else, too.

The season of giving is over.

Welcome to the season of taking . . . your money, that is. But the pain your wallet is going to feel at the pump this summer doesn’t have to make you scramble for a bus pass.

Summertime Blues

On the cusp of the summer driving season, gasoline prices took a premature jump. According to the AAA club, gasoline prices leapt 33 cents a gallon on average across the U.S. The average price for a gallon of regular gas is $2.54, compared to $2.21 a month ago.

After a few months of relatively stable prices, gasoline’s chart looks pretty scary considering that we haven’t hit summer yet, when prices peak.

Just glance below to see where regular gasoline prices are headed:

 

 

And to think that some Californians are saying to themselves, "Wow, $3.15 for gas? I’ll never see that again."

That thought is downright horrific to me.

Prices are expected to get worse, too. AAA expects the price to rise another 15 to 20 cents before April. And don’t forget that we have Easter and Memorial Day right around the corner. Those are the dates when prices usually begin their summer rise.

Typically, there is a transition from winter-blend to summer-blend fuel (the difference is that the summer fuel causes less smog). The result of the switchover is a dip in gasoline supplies as the refineries shut down temporarily to retool the production facilities.

 

Crude Future

Well, the bad news is that higher crude oil prices will directly drive gas prices higher. Demand skyrockets because there are more drivers on the roads during warmer summer months.

Crude oil prices have been averaging $60 a barrel lately, despite opening today just under $57 a barrel.

 

 

Remember the good old days when a barrel of crude oil was $30?

Okay, so 2003 isn’t exactly considered "old days," but you can see that if the trend continues, $120 a barrel in 2011 is a grim but likely forecast.

But peak oil will ensure that 2011 price will come much sooner. The oil isn’t gone, but the cost of extracting it is increasing. The cost of getting oil will keep rising as companies drill deeper and in more inhospitable places, like the Arctic Circle.

A Little Saving Goes a Long Way

The higher price of gasoline this summer doesn’t have to put you in the poorhouse, though. I’ve found a decent list of good tips to keep your fuel costs down. And trust me, it’ll come in handy when we’re back over $3.00 a gallon. Even following a few of the suggestions could save you a boatload of cash. You can find them here.

Fortunately, you don’t have to be the person who’s gouged by gas prices this summer. All you need is a little discipline.

Until next time,

Keith Kohl

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