Gasoline prices do not seem to be easing as many economists thought they would. As a matter of fact, throughout much of the country, prices continue to rise. This is particularly true in some of the states with the largest populations. That means, day by day, a huge number of Americans have to pay more to fill up the tank.
Based on GasBuddy.com data, the price of an average gallon of regular is already $4.21 in California, which is home to 38 million of America’s 316 million residents. The price in New York has hit $3.93. More than 19 million people live in the state. The price has reached $3.87 in Illinois, which has 13 million residents. In Pennsylvania, the price is $3.80. The Mid-Atlantic state is home to nearly 13 million people. In Michigan, which has 9 million residents, the price has moved above $3.74.
While the cost of refining is a portion of gasoline prices, as are transportation costs, oil prices continue to be the largest component. Crude has hovered around $100 for months. And pressure is more likely to push oil prices up than down. The turmoil in Ukraine, through which much of Europe’s oil flows, is one reason. Political problems throughout a portion of the Middle East and Central Africa are another. The relatively sharp pickup of the economy in the United States and the start of a recovery in Europe are among others.
Economists regularly argue that at some point gas prices undermine consumer spending. The problem is cumulative in most cases, starting with low-income workers and people who drive long distances regularly. Then ongoing increases progress to middle-income workers. Each household has a different tipping point, one at which gas prices begin to compete with housing, food and clothing costs. Gas prices become the enemy of consumer spending. GDP growth begins to erode slightly. A stronger economy becomes its own enemy as improved consumer activity drives gas prices up via rising consumption. A vicious circle begins.
Gasoline prices have moved close to $4 in states that have a quarter of America’s residents. On balance, that is a bad thing for the economy.
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