Janesville69.8°

How high can it get?

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JAMES P. LEUTE
November 12, 2007
— Gas for the 500-plus mile roundtrip between Decatur, Ill., and Madison: $69.

Two tickets to see the Badgers play Penn State at Camp Randall on a Saturday in November a year ago: $92.


Spending the rest of the weekend with your daughter, a UW-Madison student: Priceless.


While that might have been the case last year for John Reynolds and his wife, it wasn’t this past weekend.


Sure, the annual pilgrimage to visit their daughter always is treasured, but the increasing cost of getting to Madison and back isn’t.


This year, the Reynolds paid nearly $30 more to fuel their Ford Expedition for the trip.


“The way the price of gas has gone up is irritating, but we still wouldn’t miss it,” Reynolds said as he fueled up in Janesville on Friday. They were on their way to Madison for a date with their daughter and the Badgers’ date with Michigan.


Reynolds isn’t alone in his irritation. Motorists around the country are wondering why gas prices are rising at a time of year when they’re typically declining.


Janesville’s average price for a gallon of regular unleaded gas on Friday was $3.14, according to AAA. A year ago, it was $2.27.


AAA reported today’s average Janesville price as $3.18 per gallon.


Jeff Heinrich, chairman of the economics department at UW-Whitewater, said it’s unusual for gas prices to be increasing in the fall. They typically decline as winter approaches and motorists curtail their driving.


“It’s also unusual how fast the price of crude oil has gone up,” Heinrich said.


Erin Roth, executive director of the Wisconsin Petroleum Council, said booming economies around the world are pushing up the cost of crude oil. In the last two months, crude is up 60 cents a gallon, while gas prices are up 31 cents.


“The two mirror each other,” Roth said. “Retailers and refiners have been holding their costs, absorbing increases. But there comes a time when you can no longer keep absorbing that.”


Those costs get passed down the line, as motorists and consumers of other products are noticing once again.


Heinrich said gas prices typically are quick to go up when the price of crude goes up, but not as quick to go down when crude drops.


And whether the price of crude oil will drop is pure speculation.


“We just don’t know what will happen with crude,” Roth said. “Pundits are forecasting $120 a barrel crude, but those are the same people making money off trading in it. Others are saying there are no fundamental reasons why crude shouldn’t be trading at $65.”


What that means for gas prices is uncertain, Heinrich and Roth said. What’s likely is that the nation’s motorists need to be prepared for benchmark prices of $3 per gallon.


“It used to be that $2 was that benchmark for people,” Roth said. “But when it went over the $3 mark, we didn’t see the demand decline.


“The next question is what will happen to the demand side if it goes to $4 per gallon.”


Heinrich expects that will happen, but not likely in the next year.


“There are these benchmarks that are psychological for people,” he said. “We’re at that $3 mark again, and I think people are probably realizing that it’s here to stay.”


Gas at $3 per gallon a couple of years ago triggered consumer outrage and calls for lawmakers and policymakers to do something, Heinrich said.


“That’s not happening now,” he said. “I don’t think people like the situation, but I think they understand that it’s not going to go away.”


Sarah Prescott of Janesville is one of those who doesn’t like it.


“I’m just trying to watch my driving patterns, but I still gotta get to work, get the kids here and there,” she said while filling up Friday on Milton Avenue.


“There comes a time when you just don’t have as much money in your pocket (after filling up) to spend on other things.”



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