By Steve Kilar, The Baltimore Sun
8:20 PM EDT, September 17, 2012
Eyeing the Royal Farms sign advertising a gallon of premium gas for $3.99, Taryn Gross-Ojekwe's jaw fell open.
"When it is going to cease?" she said of the price, which has climbed steadily over the past few weeks. "Just within the last few days, it was $3.79."
As a freelance upholsterer, the Baltimore resident doesn't have a big enough income to brush off a quarter increase per gallon. The Nissan Sentra she parked at the pump on Russell Street on Monday afternoon now consumes about $60 at each fill-up.
Fortunately for Gross-Ojekwe and everyone else with a car, gasoline prices are expected to level off in the coming weeks, experts say.
Gas prices typically ease after Labor Day as demand ebbs when the summer travel season ends. This September, unrest in the Middle East and the effects of Hurricane Isaac pushed prices higher.
Over the past seven weeks, the average price of a gallon of unleaded gasoline in the Mid-Atlantic region has increased more than 30 cents, from $3.72 per gallon on Aug. 6 to $4.04 on Monday, according to a survey by the U.S. Energy Information Administration.
Diesel prices, a major factor in the cost of shipping goods, have increased by about the same amount. The average price for a gallon of diesel is now $4.20, according to government estimates based on prices at stations from New York to Maryland.
"It's very rare to see a jump in September," said Ragina Averella, public and government affairs manager for AAA MidAtlantic. "Typically, we begin to see gas prices stabilize and actually fall through mid-September."
If another hurricane hits the Gulf of Mexcio or if the Middle East unrest worsens or flashes into a larger conflict, Marylanders may be forced to keep changing their spending habits to accommodate even higher prices.
Prices usually drop in the fall as people cut back on driving, Averella said. If people are driving less, demand for fuel decreases and prices at the pump drop, she said.
In terms of declining demand, this autumn is no exception. What made prices go up are complications on the other side of the supply-demand equation.
Crude oil prices, which translate to higher retail gas prices, have remained high this month because of Hurricane Isaac blowing across the Gulf of Mexico in August. The storm forced many oil wells to shut down for safety reasons, according to AAA.
Then, AAA said, several factors last week combined to push retail gas prices up even more: unrest in the Middle East over a YouTube video that was offensive to Muslims; the Federal Reserve announced another economic stimulus; and a German high court decision caused the value of the dollar to drop.
"It's not an easy thing, trying to predict what gas prices will do, because so many factors are involved," Averella said. "We expect prices will go down, but we always have to be mindful of ongoing geopolitical events, not to mention the fact that we are still in hurricane season."
U.S. consumers usually see the lowest gas prices of the year from October through December, said Gregg Laskoski, a senior petroleum analyst with GasBuddy.com, which tracks gasoline prices.
"There's no question that a lot of people are very nervous that here we are, two weeks after Labor Day, and nationally, prices are still this high," Laskoski said.
He agreed with Avarella's assessment, that weather and international factors have pushed prices up during a period when they normally go down. "This year is a little bit different than what we've seen in past years, partially because of Isaac and partially because of what we saw last week" in the Middle East, he said.
Those unexpected events may be counterbalanced in the coming weeks, Laskoski said, by one that is like clockwork: refineries' annual switch from producing a summer gasoline blend to a winter mix, he said.
Government regulation "creates this roller-coaster effect on gasoline prices" each spring and fall when producers change their formulas, he said.
Summer-blend gasoline contains additives that reduce smog, he said. The federal government mandates the additives' use during the summer months, when metropolitan areas are more affected by air pollution. The period during which retailers must sell the summer mix ended Saturday, according to AAA.
Refineries are nearing the completion of their conversion to the winter blend, which is cheaper to make, Laskoski said. Some of the winter-blend savings are passed on to consumers and should be reflected in retail prices within the next few weeks, he said.
"Barring more hostilities that erupt in the Mideast, we should see the winter blend bring prices down," said Laskoski, who acknowledged that higher gas prices can be "very problematic" for consumers.
"It really takes away from a lot of discretionary spending that they might have," he said.
Isabel Sawhill, a Brookings Institution scholar who has studied the impact of gas prices on family budgets, said her research shows higher prices can cause ripple effects at all income levels.
"Even for higher-income people … because a basic necessity of life now costs more, you do have to reallocate their consumption," Sawhill said.
Lower-income people have to make harder choices about what to give up in order to pay a few dollars more each week for gasoline, Sawhill said.
"This really does cut into their budgets in a significant way," she said. "It means they have to give up something that's quite important to them — maybe buying stuff for their kids, or eating out, or going to a movie, or getting a leak in the roof fixed, or a new tire for the car. It has an impact."
Gross-Ojekwe is shopping at less expensive clothing stores and limiting her nighttime outings to once a month — BYOB reggae concerts are her go-to diversion — to help absorb the rising cost of fuel.
"I used to be a fashionista," Gross-Ojekwe said. "I have to cut back on entertainment for myself."
The one thing the upholsterer said she won't cut back on is her 10-year-old: "She does too great in school."
Gas prices on the rise
Average price, in dollars, of a gallon of fuel in the Mid-Atlantic region
Unleaded, all grades3.723.813.833.873.913.954.04
Diesel, all types3.934.004.074.134.154.184.20
Source: U.S. Energy Information Administration
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