U.S. motorists are expected to spend $50 billion more to fill their tanks this year as rising oil prices put an end to $2 a gallon gasoline, squeezing consumer finances just as wages begin to rise.
Gasoline costs are expected to surge nearly 20 percent this year — they're already up by 20 cents a gallon in the past month — following the Nov. 30 decision by OPEC to cut crude production, according to a forecast released Wednesday by GasBuddy, which tracks fuel pricing. Many economists compare rising gasoline prices to tax increases, which take money from Americans who otherwise might spend it in stores, restaurants and other consumer businesses.
But the news is mixed for drivers in some areas such as Texas, where energy — namely crude oil, natural gas, and refined products — drives regional economies. The oil and gas sector is just beginning to rebound after a two-year bust that pushed scores of companies into bankruptcy and cost Texas 100,000 jobs, but also led gasoline prices to 12-year lows, bottoming at less than $1.50 a gallon last year.
Alex Lunde understands this economic tension. A Texas-based energy worker, he smiled Tuesday as he filled his car with gas for $2.70 a gallon at the Valero station — one of the city's priciest — on Richmond Avenue near the Galleria.
He often reminds his friends in the region celebrating low gas prices that a lot of jobs hang in the balance — including his. "When oil prices are a little bit higher," said Lunde, 27, " I'm a little bit happier because it means I'm not losing my job."
Still, Lunde isn't rooting for $5 a gallon gasoline either. "There's a delicate balance that needs to be found," he said.
Crude oil settled in New York at $52.33 a barrel, double the February low of about $26 a barrel. Crude prices have risen more than 15 percent since the Organiation of the Petroleum Exporting Countries agreed at the end of November to cut output by 1.2 million barrels day.
Gasoline prices have followed. Prices hit an average of $2.13 a gallon for regular unleaded on Tuesday in the Houston area and $2.35 nationwide. Nationally, gasoline costs are expected to average nearly $2.50 a gallon nationally in 2017, up from $2.13 last year.
"It may be years before some of the low prices we saw in 2016 come back," said Patrick DeHaan, senior petroleum analyst for GasBuddy. "If motorists made a resolution to pay less in 2017, they either broke it already or aren't planning on driving for a while."
The higher fuel prices will take a bite, albeit a small one, from worker's earnings just as they start to rise. Hourly wages, after stagnating in recent years, have risen 2.5 percent nationally over the past year as falling unemployment increases competition for workers, according to the Labor Department. The national unemployment rate fell to 4.6 percent in November; Texas's jobless rate also was 4.6 percent.
Gasoline accounts for about 4 percent of U.S. household spending, according the Labor Department. In Texas, higher gas prices are a "double-edged sword" said AAA Texas spokesman Doug Shupe. It's bad to lose the extra spending money, he said, but positive when the job losses are ending and there's less economic suffering,
He added that prices are unlikely to jump so high that it will change consumer spending habits much. But, the two-year spurt in sales for sport-utility vehicles and trucks could come to an end as fuel-efficient vehicles appear more attractive again, Shupe said.
How far and how fast gas prices rise may well depend on whether OPEC sticks to its agreement to cut output. Russia and 10 other non-OPEC nations also agreed to cut about 550,000 barrels a day, and analysts question whether they, too, will follow through.
"All eyes are really going to be on OPEC and whether it's going to stick to its cuts," said Shupe.
The reductions were scheduled to start with the new year. While some cutbacks are coming, at least from Saudi Arabia, skepticism remains that other nations will make the reductions since OPEC and Russia have a history of cheating and fudging numbers, said Ed Hirs, an energy economist at the University of Houston.
"It's just going to be real difficult for the Saudis to enforce this," Hirs said.
If history repeats itself, that would limit how much oil and gasoline prices rise in 2017, he said. But, he added, "It's going to be volatile this year, so we don't know how it's all going to play out."
Share this:
