Crude oil prices closed above $90 a barrel for the first time in two years, raising the likelihood that U.S. gasoline prices will reach an average of $3 a gallon for the first Christmas ever.
California already far surpassed that point this season — the average pump price was $3.28 Wednesday, according to the U.S. Energy Department. Experts said it’s heading for $4 and more in parts of the state.
The rising gas prices have experts worried about how the slow-recovering economy could be affected.
“Higher fuel prices mean that you have less available to spend on everything else,” said Nancy Sidhu, chief economist for the Los Angeles County Economic Development Corp. “To the extent that incomes are constrained, it really creates a tough time. You will spend more on gasoline, but at the expense of what else?”
Drivers said a continuing rise in prices could be devastating.
“A gasoline price spike now would be even worse than it was back in 2008,” said Stephen Stone, a 48-year-old computer scientist from Norwalk, because “the economy was booming then and people could afford it more.”
Stone has already curbed his use of fossil fuels. He uses a Zap Zebra electric car for trips around town, but it has only a 40-mile range before needing a recharge. He uses a 2006 Town and Country van for longer drives.
“The economy is sputtering,” he said. “This is just going to be a double whammy on all of us.”
As of Wednesday, the national average was just 0.007 cents shy of $3, with experts saying it could head much higher.
“We have never seen gasoline prices this high at this time of year,” said Tom Kloza, chief oil analyst for the Oil Price Information Service, “and it’s setting us up for the second-highest spring of prices ever.”
The national and state averages are still far under the overall record — that was about $4.11 nationally and $4.59 in California in 2008, according to the U.S. Energy Department. But that was during the summer driving season when pump prices traditionally hit their heights.
“Prices typically rise during the summer driving season and drop after Labor Day,” according the weekly petroleum report from the Energy Department.
“However, 2010 has seen a reversal in this pattern. The national average price has risen by 30 cents a gallon since Labor Day, the largest increase over that period,” the report said, since weekly retail gasoline price data started being tracked in 1990.
Fadel Gheit, senior energy analyst for Oppenheimer and Co., said that if current crude prices continue to rise, it could seriously damage recovery from the recession.
“I can only hope that we don’t see oil near $150 a barrel again,” Gheit said, “because that would absolutely crush the economy.”
But Gheit said there is reason for hope that it won’t head much higher, at least through 2011.
“We will be seeing more and more energy efficiency in vehicles, more and more hybrids and electric cars,” he said. “Investment in non-conventional sources of energy will increase.”
And he said the current higher prices could be the result of an artificial shortage.
“This increase in oil prices is not supported by fundamentals of supply and demand,” he said.
He said the lessening of the crude supply on the market occurred during one of the biggest oil gluts in history, when there was so much oil available that supertankers were being rented not to deliver it, but to store it.
Statistics released Wednesday from the Department of Energy seemed to support that conclusion. While U.S. oil supplies were reduced substantially by 5.3 million barrels in just the past week, they were 13.1 million barrels higher than they were during the same week in 2009.
“There is no oil shortage in the world right now,” Gheit said.
No matter what the underlying reason, the current high prices for gasoline come at a particularly bad time, economists said, with Americans finally spending more on holiday retail purchases and buying more big-ticket durable goods such as cars and SUVs.