If anyone needs confirmation that gasoline prices have risen, it comes from the news that now only two states have gas prices under $2, based on the average cost for a gallon of regular. The average price nationwide has moved from $2.03 a month ago to $2.32, an increase of 14%.
Most, if not all, of the increase is due to oil prices, since gas taxes and transportation costs have not risen over the short period of the spike. Oil prices are not supposed to affect gas prices so quickly. That has not stopped retailers from bumping up prices aggressively.
In Utah, the average price of a gallon of regular is $1.93, and in Idaho it is $1.95, according to GasBuddy. At the current rate of increase, $2 gas could be the average in both these states in a matter of days. The news is worse for some larger states, where gas prices are now over $2.45. This includes California, the largest state by population, at $2.98. That number could shortly move above $3. In New York, the price has risen to $2.49 and in Pennsylvania $2.46. These states have about 20% of the U.S. population.
ALSO READ: $50 Oil Will Cost at Least a Million Jobs
Falling gas prices are said to create a “middle income tax cut.” Presumably this holds true for lower income Americans as well. The value of the cut has been calculated as high as $1,000 a month per household, particularly for households that use heating oil. Logically, this increases discretionary income, which often causes an increase in consumer spending. Consumer spending lifts the economy, and gross domestic product improves as a result. GDP in the first quarter should be affected by the low gas prices. High gas prices short-circuit the chain.
The movement of the price of oil is nearly anyone’s guess. Forecasts range from a return to $100 to a drop to $20. Recently some members of OPEC have asked for a special meeting, as several members suffer trouble with their national economies. In the meantime, OPEC’s most powerful member, Saudi Arabia, says it will continue to produce crude at current levels.
Gasoline has moved above $2 a gallon. A year ago almost no one predicted it would break that barrier on the way down. Some hopeful forecasts had suggested that more and more states would have sub-$2 prices. For the time being, their bets have not panned out.
ALSO READ: 5 Stocks That Really Benefit From Lower Oil Prices
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