Just what Americans need as they try to dig out from the Great Recession: gas prices headed back toward $3 per gallon.
The average price of a gallon of regular gasoline hit $2.70 on Thursday, according to the auto club AAA. That's up 67 percent from this time last year, and it's the highest price since October 2008 — a fact not lost on drivers.
Sayed Bilal, a cab driver in Rockville, Md., estimated that he's spending $200 more a month on gas. "It's affecting everyone's budget," he said, "especially after the holidays. In my business, I depend on people's pocket money. If they don't have any ... ." He trailed off with a shrug.
Why are prices rising even as demand for gasoline is falling? The crudest explanation is that the price of gas is following the price of oil upward. Oil, like all commodities, has been rising, pushed higher by increased demand and a weak U.S. dollar.
The global economy has been improving for six months, and more activity means more demand for oil, driving up prices. At the same time, the value of the dollar has fallen relative to other currencies. As the dollar weakens, it becomes less attractive to hold, so investors are increasingly dumping the currency and moving into oil, gold and stocks. That, in turn, has helped fuel a strong recovery in commodity prices.
Even though gas is still well off its high of more than $4 per gallon, hit in mid-July 2008, commodities traders have been watching the price of crude oil rise since almost this time last year.
More than a minor annoyance encountered every time you pull up to a pump, rising gasoline prices have a real impact on the U.S. economy, especially as it's struggling to recover after a nearly two-year recession.
Every 10-cent increase in gas prices equates to an additional $14 billion per year out of consumers' pockets, Peter Boockvar, an equity strategist at Miller Tabak, wrote in a research note on Thursday. Americans already spend $1 billion per day on gas.
And of course, rising prices at the pump can lead consumers to direct their ire at a familiar target: Big Oil.
"It's ridiculous," said Joe Lamari, as he filled his tank at Freestate Gas, a cash-only gas station in Rockville.
On Thursday, he paid $2.65 per gallon; a few weeks ago it was $2.49. "It was $2.58 just the other day!" interjected a man at the neighboring pump.
