U.S. Gas Prices Continue to Rise

Each of the two major reports of national gasoline prices shows that the cost per gallon continues to rise. This at a time when the U.S. consumer needs as much discretionary income as possible as the holiday season approaches - if he has any such income at all.

The Lundberg Survey reported that, over the past two weeks, the average price of a gallon of regular gas nationwide rose 7.85 cents to $3.8376. Data released by the analysts at the AAA Fuel Gauge put the price at $3.828 yesterday, compared to $3.685 one month ago.

There is no clear evidence that, as gas prices rose to near $4 in late winter, the increase hurt consumer and business spending. However, the increase did coincide roughly with a slowdown in the economy. Perhaps that was just a coincidence. As the prices continue to rise now, the coincidence may occur again.

The increase comes at an inconvenient time. Consumer and business owners have spent weeks reading about the fiscal cliff. That almost certainly has created anxiety, prompting increases in caution over spending. And with the holiday season, which is a "make-or-break" period for retailers, beginning in six weeks, sales could be much worse than expected.

There are a number of reasons gas prices should go down soon. Hurricane Issac has come and gone. There are no other major disruptions in the supply chain worldwide. The worry about Iran's reaction to sanctions because of its weapons programs has been less disruptive than feared. Exports from other large oil-producing nations remains steady. And a slowing global economy should lower demand for crude.

But rising gas prices are not soon likely to reverse sharply, based on the history of those prices. That adds another financial burden to the economy as the end of the year approaches.

Douglas A. McIntyre

Filed under: 24/7 Wall St. Wire, Oil & Gas, Research Tagged: featured