Gas Prices Are Out of (Your) Control
NEW YORK (MainStreet) -- If you think that gas prices are out of control, think again. At less than $4 a gallon nationally -- and during the summer, no less -- Americans are like the pampered gas guzzler of the Western world.
Try the U.K., where the most recent weekly rate for gas was $7.79, or the Netherlands, where the price of gas now tops $8.
It's good to be an oil-producing country, but even with the U.S. profile as an oil producer on the rise -- "The Middle East of the 21st Century," as the rhetoric now goes, thanks to fracking -- other countries retain far greater influence over the ups and downs in the pain at the pump.
No, gas prices aren't out of control compared with the rest of the world, however, the past week's action in gas prices does show that gas prices remain out of your control, specifically. A spike often has nothing to do with actual consumption, little to do with dynamics in the oil market supply chain, but amounts to much ado about geopolitical risks dominating the headlines.
According to the most recent MasterCard/SpendingPulse survey, year-on-year demand for gasoline was down 4.4% from June 2011 to June 2012. Gasoline demand was down 3.2% from the year-ago level, according to the most recent U.S. Energy Information Administration weekly data, through July 23. U.S. crude oil inventory went higher in the past week, a surprise to the market, and the EIA reported that the level of domestic oil production hit its highest level since 1999. Meanwhile, a shorter-term Mastercard gauge reveals that demand is down even more, at 4.6%, over the past four weeks.
None of this suggests a surge in demand causing an inevitable spike upward in the price of gas, yet oil prices rose for the third straight week due to geopolitical tension in Iran and Syria, and because of supply problems coming out of oil-rich Sudan. Those factors are beyond the control of American consumers, but they are big influences over the price of gasoline.
The worst fears of a summer that would find gas prices rising above $5 never came to pass, with the dour economic mood leading up to summer clobbering oil prices, but the momentum has shifted again. After rising by only two cents the week before, U.S. gas prices surged from $3.43 per gallon to $3.49 per gallon in the week ended July 23, according to EIA data, driven largely by a continued climb in crude oil prices, once again above $90 per barrel.
That impact is taking its toll on U.S. consumers.