Gas cost inches toward record
Even with gas prices challenging the record high, experts still are unwilling to say if or when gas will hit the $4 mark.
According to the AAA daily fuel gauge report, a gallon of regular unleaded gas in the Janesville-Beloit area is $3.34, which is 7 cents shy of the record set around Memorial Day weekend last year.
But signs at local stations this morning showed prices between $3.35 and $3.40.
It seems clear prices will hit, if not surpass the $3.41 record in coming weeks.
“It’s probably more likely than not,” said Pam Moen, public affairs director for AAA Wisconsin. “But it’s impossible to sit here today and predict what’s going to happen.”
AAA isn’t jumping on the $4-a-gallon gas bandwagon, she said, but that’s not to say it couldn’t happen.
The best guess is that gas prices will peak at a national average of $3.50 a gallon.
The creep toward record gas prices has been inevitable given the upward surge in crude oil prices, which closed near $109 per barrel Monday and have remained above the $100 mark for months.
Crude oil hit a new all-time high of more than $111 a barrel within the last week. A month ago, $100 a barrel was unheard of, Moen said.
And that’s what’s leading the charge toward record high gas prices.
Between the overall weakness of the U.S. economy and the relative weakness of the dollar, there’s nowhere for crude oil prices to go but up.
“Oil is globally traded in dollars,” Moen said. “And if you’re an oil-producing nation, oil at $111 a barrel isn’t putting the same amount of money in your pocket as it would have when the dollar was stronger.”
Will the price of crude oil ever drop back to double-digit figures?
Moen isn’t sure.
“Once oil-producing nations have commanded unprecedented high prices, are they ever going to accept $70 a barrel again?” she said. “I’m afraid of opening that Pandora’s box.”
Moen said it appears rising gas prices are defying basic economic logic.
The supplies of oil and gas are high and consumer demand is low, yet somehow prices on the stock market trading floor and at the pump remain high.
It’s got Moen puzzled.
“That’s the opposite of what should be happening,” she said. “And it’s very disturbing for consumers, who every week find themselves paying more for gas.”
But at some point, the economic scales of supply and demand have to balance.
So what’s it going to take for gas prices to drop?
“The strength of the U.S. economy needs to turn around, and the strength of the dollar needs to bounce back,” Moen said.
And crude oil prices need to decrease and stay there, she said. Last week, the price of crude oil dipped below $100 a barrel, but that wasn’t enough.
“A blip in the trend like that won’t get us the relief we’re looking for,” Moen said.
By the numbers
Current local average cost for a gallon of gas
All-time record, set around Memorial Day weekend 2007
Approximate cost for barrel of crude oil on Monday