STAMFORD, Conn. -- One sure sign of spring: local newspapers begin predicting and lamenting the rise of gasoline prices. Such was the case in a recent story in the Stamford (Conn.) Advocate. Fueled by rising crude prices, the newspaper noted, the cost of gas rose more than 25 cents during the past month and energy industry observers said motorists can expect to pay $3 a gallon by Memorial Day.
Crude oil rose 70 cents to settle at $67.15 a barrel on the New York Mercantile Exchange March 30, the highest price since Jan. 31. More alarming for motorists, [image-nocss] according to the report, is that wholesale gasoline prices closed slightly under $2 the same day. It's the highest since October, when drivers were still recovering from the Hurricane Katrina-induced spike.
All of these factors mean gas at $3 a gallon, Michael Fox, executive director of the Gasoline Automotive Service Dealers of America in Stamford, told the newspaper. "We'll see $3 by Memorial Day, no doubt about it," Fox said. "And ($3) will probably stick around."
Connecticut state pump prices averaged $2.59 a gallon March 30, up 28 cents from a month ago and 44 cents from a year ago, according to the AAA's daily fuel survey.
Concerns about supply disruptions in Nigeria and Iran have contributed to the increases, but the gasoline additive ethanol also has been a huge factor the past few weeks, observers said.
Although Connecticut and New York switched to the corn-based additive ethanol more than two years ago because it is more environmentally friendly, the rest of the country is preparing to make the transition now. Thus, the head of the federal Energy Information Administration told a Senate committee this past week the ethanol industry may not be able to keep up with demand for the summer driving season.
The speculation has made ethanol's price jump to $2.50 a gallon. Mixing something so expensive with gasoline is causing prices to climb rapidly, said Steven Guveyan, executive director of the Connecticut Petroleum Council.
What's most confounding to some, according to the newspaper report, is how consumers appear undeterred by the higher prices. Federal reports indicate demand continues to rise and consumer spending has not taken a serious hit. "It doesn't make a whole lot of sense to me," said Peter Beutel, president of Cameron Hanover Inc., an energy risk management firm in New Canaan, Conn. "It's hard to tell at what point consumers will start to balk. It defies the laws of economics."Members help make our journalism possible. Become a CSP member today and unlock exclusive benefits, including unlimited access to all of our content. Sign up here.