Become a digitalPLUS subscriber. 99¢ for 4 weeks.
Business

Gas prices post big jump since last month

As gas prices soared toward $4 per gallon, Fred Price has sought out the best deals at the pump.

Even so, the self-employed handyman who drives to jobs throughout Baltimore is feeling the pinch of a more than 40-cent-per-gallon jump in the last month.

"I have to cut back on my traveling, and I'm using less help," Price said Monday as he pumped another $30 worth — about half a tank— into his Ford F-150 pickup. "I'm trying to keep up with it, but it's making it really hard to buy gas."

A gallon of regular gas cost 44 cents more on Monday than a month ago — an average of $3.78 up from $3.34 nationwide, according to AAA's Daily Fuel Gauge Report. That's the largest monthly increase since June 2009. Gas prices had risen 36 days straight through Friday, before relenting slightly over the weekend, AAA said. (A year ago, regular gas cost on average $3.69 a gallon.)

Prices in Maryland have mirrored national trends, with regular gas averaging $3.79 per gallon Monday, up from $3.38 a month ago. Prices have crossed the $4-a-gallon barrier at numerous stations around the state, especially in suburbs near Washington, where drivers on Monday found regular gas averaging $4.02 per gallon.

Analysts expect prices to continue rising, though more slowly, with averages peaking at a lower level than last April's high of $3.94 per gallon.

Rising gas prices affect consumers' budgets differently depending on their income levels, said Steven Isberg, a professor of economics and finance at the University of Baltimore Merrick School of Business.

"If you're a family on a fixed budget, you've got to get back and forth to work and … you're stuck paying the high price, so something else comes out of your budget," he said.

This is the second year in a row with atypically high winter gas prices, said Ragina C. Averella, public and government affairs manager for AAA Mid-Atlantic. But prices have shot up faster this year, she said. Prices usually increase in the spring as refineries switch to producing summer-blend gas, a more environmentally friendly fuel.

This year, prices have risen earlier than usual as crude oil prices have increased and as U.S. refineries have gone offline earlier to switch to making the summer-blend or have faced other disruptions, AAA said. Crude oil had been approaching $97 per barrel until last week, when prices began to ease, closing at $93.11 per barrel Monday.

While U.S. gas prices dipped a fraction of a cent over the weekend, "the downturn appears negligible, an interlude rather than a trend change," Averella said.

Patrick DeHaan, a senior petroleum analyst with GasBuddy.com, which tracks gasoline prices, said higher prices are partly a result of investors' pouring money into crude oil, expecting high gasoline demand.

"Speculators are looking to make a buck, and everyone is throwing money into oil, and that causes prices of oil to go up, and gas prices follow," said DeHaan, who said $23 billion has been invested in crude oil in about two months, according to the U.S. Commodity Futures Trading Commission.

Demand for gas also is up slightly from a year ago, which could reflect improvements in the economy, he said.

"As long as speculative money pours in, prices will continue to go up," though "it's likely we're close to a peak, if we haven't peaked already," DeHaan said.

Consumers are hoping for a break soon. Lisa Lewis, who lives near Morgan State University and spends much of her day dropping off and picking up her three teenagers from different schools, pumped gas Monday at the Sunoco A-Plus Mini Mart on York Road. It was one of the lower-priced stations in the city, selling regular gas for $3.67 per gallon Monday.

Lewis said she spends about $125 a week to fuel her minivan.

"It's ridiculous," she said. "You have to cut back on other stuff, like going to the food store."

Israel Negash, president and owner of the Sunoco, said he is able to keep prices lower than the average by relying on sales of soda and snacks in the mini-mart. The lower prices help lure customers, keeping the pumps busy, he said.

"We try to do what we can to keep the lowest prices," he said.

Isberg, the economics professor, said that consumers tend to cut back on discretionary spending to accommodate higher gas prices, such as going to movies or sporting events and taking vacations — especially driving trips — which can hurt tourism.

"What we've experienced in the last three or four years is [gas] prices have been jumping up and down," he said. "We're seeing a lot more volatility. That could be because people's behavior changes when prices go up. When gas prices increase and people cut back on travel, that affects demand for gasoline."

In an economy he described as in "realignment," not recovery, and with the federal government sequestration cutbacks looming, "it's not a really good time for gas prices to go up, in terms of where the economy's heading."

lorraine.mirabella@baltsun.com

  • Text BUSINESS to 70701 to get Baltimore Sun Business text alerts
  • Copyright © 2014, The Baltimore Sun
    Related Content
    Comments
    Loading