Gas prices rise as Middle East unrest continues

Posted February 24, 2011

— The cheapest gas prices in Raleigh are more than $3 a gallon.

“It’s getting ridiculous for prices to be as high as they are,” driver Lisa Lawson said this week. “It’s hard to pay rent and then spend $3 (a gallon) on gas.”

Oil prices had been rising for months, but they jumped this week to $100 a barrel as violence gripped Libya. Analysts say any production declines in Libya could likely be absorbed by other producers like Saudi Arabia. Libyan oil accounts for less than 1 percent of U.S. crude imports.

North Carolina State University economist Michael Roberts said consumers shouldn’t expect gas prices to drop any time soon.

“We’ll store more of the commodities, more of the oil today, in case prices go up in the future, so that causes prices to go up right now,” Roberts said.

About half of the price of gasoline is the cost of refining and retailing, as well as taxes. The other half is the cost of crude oil.

“If you see oil prices go up 15, 20 percent, you'll see gas prices go up by about half that,” Roberts said.

Roberts said higher gas prices probably will not push up other prices.

“Transportation is going to be a very small share of the retail price of almost anything that we buy,” Roberts said. “The vast majority of almost everything we buy in the United States is the cost of labor to produce it.”

These high gas prices mean that it will take a little more labor to fill up gas tanks.

“I’m hoping that these prices come down and really soon, so we can be able to maintain,” Lawson said.

The national average for a gallon of unleaded was $3.19 on Wednesday — 53 cents more than a year ago. Analysts expect the average to range between $3.25 and $3.75 this spring.

Gas prices rise as Middle East unrest continues

Drivers aren’t the only ones suffering from the high oil prices. Consumers and businesses would also feel pinched by a sustained period of $100-a-barrel oil. Stock prices, which have lost more than 2 percent so far this week, could sink further. That would reduce household wealth and consumer confidence. As fuel costs price rise, so would prices for travel services and products containing plastics.

This month, several airlines tacked on fuel surcharges — extra fees that help cover fuel bills.

Rising oil prices have pushed jet fuel close to $3 a gallon. Fuel accounts for roughly one-third of the budget for U.S. airlines, up from less than one-fifth a decade ago. Fitch Ratings analyst William Warlick said if jet fuel reaches about $3.20 a gallon, "the whole industry will be challenged to stay profitable."

Airlines may soon decide to eliminate some flights and ground older jets to cut fuel consumption, Warlick said. Delta Air Lines has already scaled back plans to add flights this year.

Analysts estimate that, over a year, $100 oil would reduce U.S. economic growth by 0.2 or 0.3 of a percentage point. So, rather than grow an estimated 3.7 percent this year, the economy would expand 3.4 percent or 3.5 percent. That would likely mean less hiring and higher unemployment.

The global economy wouldn't be affected as much. In part, that's because emerging economies consume less oil per person than industrialized countries do. In addition, many developing countries regulate or subsidize the cost of gas. Global growth would slip about 0.1 percentage point, economists estimate.


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  • Bendal1 Feb 25, 2011


    Perhaps you can provide some proof to your claim that "there's plenty of oil in the US". You do realize that oil that costs, say, $200/barrel to extract, won't get used until the price of a barrel of oil is that amount or higher, right? That's why we drill 2 miles below the Gulf of Mexico, through two miles of water, to get to a pocket of oil with fewer barrels in it than the US uses in one year.

    No, we won't "run out of oil" any time soon. What we WILL run out of is oil that can be reached at a cost less than $100/barrel. Once oil hits $120/barrel, will you change your driving/lifestyle, or will you just keep complaining and denying Peak Oil is already here?

  • Raleigh Boys Feb 25, 2011

    Meanwhile IBM exec's are gonna get huge bonuses next month by laying off more employees. Nice.

  • Dark of the Moon Feb 25, 2011

    There is enough oil in our own country and off our coast to last 100+ years.

    Don't believe the zombie liberal talking point that we do not have oil here. As a matter of fact, don't listen to ANYTHING liberals say. They are clueless and have to be told what to think.

    Charlton Dude

  • hppyhourhero Feb 25, 2011

    Blame Obama, Blame Bush...Blame big oil..Blame the middle east...But then what did learn from the oil shortages of 1970's? and here we are some 30 plus years later, still in the same cycle...And we all want to blame somebody else, rather than look in mirror.

  • hi_i_am_wade Feb 25, 2011

    "Yes, the days of peak oil are here." - Bendal1

    WRONG WRONG WRONG and WRONG! And WRONG some more. Peak oil is not here! Not even close. Maybe in 30 years, emphasis on maybe. Because there are enough KNOWN oil reserves to last for decades, plural. The problem is the watermelons - green on the outside, red on the inside - politicians and special interest groups put a halt to drilling these known oil reserves. Did you know that off California there is so much oil it leaks into the ocean? But, California being stupid, they won't drill. There are so many new oil reserves being discovered that some are proposing the earth naturally generates oil. I don't know if that is true, but it has more proof behind it than "Big Oil is greedy" and "we are at peak oil".

  • Bring on the 4 Dollar Gas Feb 25, 2011

    "you can expect high prices this spring thru summer"

    WRONG! You can expect it from here on! We'll hit $5 a gallon easily by summer and it won't stop there once a few hurricanes threaten. As for hoping it doesn't hurt the economy, WRONG again! It's going to devastate people who don't have fat bank accounts. And that's about 90% of us. Your food will double, your utilities, your expenses on everything will go up and in lots of cases go up a ton. Hope all you want, it won't help. We are toast.

  • jcd241959 Feb 25, 2011

    What is the wonderful one doing! Our wonderful prez luvs what is happening. His agenda to destroy America is working! Hopefully he can have a vacation with his wonderful family!

  • ObamaMustGo aka NCcarguy Feb 25, 2011

    I thought it was Bush's fault??

  • Bendal1 Feb 25, 2011

    I love it, watching people here talk about "doing something" about the rising oil prices, as if Obama or anyone else has this power and doesn't want to use it for some reason.

    No, domestic oil production is insufficient to make us independent of foreign oil imports. No, we don't have magic resources of oil that no one's drilling to lower the price of gasoline. No, drilling in Alaska won't solve our oil problems; the total amount of oil up there is less than what we use in six months. Yes, the days of peak oil are here; that's why when Libya, a country with only 2% of the world's production goes nuts, we see this happen. There's no reserve production left!

    Yes, the oil companies have us by certain parts of our anatomies, and they know you'll keep right on buying $4/gallon gas for your 15mpg behemoth for your 50 mile commute while you're moaning and griping about doing so. That's why they're so eager to raise the prices and so reluctant to lower them.

  • truth9806 Feb 25, 2011

    Aren't you glad obama has suppressed domestic oil production ?