Author Topic: Do all your shopping now -- $4 gas coming!  (Read 418 times)

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Offline Matthew

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Do all your shopping now -- $4 gas coming!
« on: November 21, 2007, 11:00:25 AM »
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  • What $100 oil would cost you

    With crude approaching $100 a barrel, consumers should brace for record gas prices and higher airfares - just in time for the holidays.

    November 21 2007: 10:41 AM EST


    NEW YORK (CNNMoney.com) -- Even if the price of oil doesn't breach the $100 mark, its recent rise is starting to bite - at the pump, the airline ticket counter and possibly in your home.

    Oil is hovering near $100 a barrel and gasoline prices could soon top their all-time record from last May of $3.22 a gallon.

    "There's no doubt, gasoline prices are rocketing higher," said Stephen Schork, publisher of the industry newsletter the Schork Report. "By Christmas, we could be paying more for gas than we were during the start of the summer driving season."

    Gas prices jumped 27 cents a gallon in the last month and now average $3.09 a gallon nationwide, according to AAA. Many states have had gas over $3 for some time.

    In the past few months, drivers have gotten off easy - gas prices hadn't kept up with the increase in oil prices. The main reason: Demand has been fairly tame.

    But now, demand is set to pick up into the holiday season.

    At the same time, supplies of gas could get tight as many U.S. refiners are undergoing maintenance, according to Schork. And they stand ready to decrease production if gas prices don't move higher, according to Kevin Norrish, a commodities analyst at Barclays in London.

    "The relative price of gasoline is low, and that's unsustainable," said Norrish.

    As for next spring, when gas prices usually spike on anticipation of increased demand over the summer, Schork noted that in all likelihood we'll be going into the season with much less in gasoline inventories than last year.

    "You're that much closer to $4" a gallon gasoline, he said.
    Expensive flights

    Higher oil prices also mean higher airfare for travelers. As the price of crude rises, jet fuel prices also increase.

    Earlier this month, American Airlines - the nation's biggest carrier - raised the price of U.S. round-trip tickets by $20, and other major airlines followed suit.

    American said it increased fares in an attempt to offset losses from rising crude oil and jet fuel prices.

    The Air Transport Association (ATA), the airline industry's main trade group, said recently higher fuel prices drove second-quarter costs 5.6 percent higher. That's more than twice the rate during the same period last year.

    "Jet fuel has been going up consistently for the last 3 to 4 years to the point where it's affecting the airlines bottom line," said Will Alibrandi, an analyst for the aviation market analysis firm Forecast International. "Any cost gets returned to the customer, so they've been bumping up ticket prices to make up the difference," he said.
    Heating up a bit

    Rising oil prices could also mean higher heating bills for those who use oil - mostly households in the Northeast, or about 7 percent of the country.

    For them, oil's rise will be particularly painful: a 22 percent increase in bills from last year, according to the Energy Information Administration.

    The rest of the country doesn't face such steep increases, but they won't exactly get a free ride.

    Roughly 50 percent of Americans use natural gas to heat their homes. And while natural gas prices aren't tied directly to the price of crude, those who use natural gas could see a 10 percent increase in home-heating bills.

    Norrish expects natural gas prices to rise only modestly in the near future.

    People who heat with electricity, about 30 percent of the nation, can expect to pay 4 percent more.
    The bigger picture

    One fear is that higher gas prices will lift the costs to transport all goods, whether by truck, ship or plane - and that manufacturers and retailers will respond by raising prices for consumers.

    But economists say that's unlikely.

    While costs to business have risen, cost for consumer goods have not posted a corresponding increase, said Drew Matus, a senior economist at Lehman Brothers.

    "We haven't seen an impact," said Matus. "It's just not as significant as the shock value suggests."

    As for consumer spending, Matus said high gas prices haven't had much of an impact as gasoline generally doesn't make up a huge chunk of people's disposable income.

    "I think energy prices would have to be much higher in order for them to have an impact on consumer behavior," he said.
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    Offline Adesto

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    Do all your shopping now -- $4 gas coming!
    « Reply #1 on: November 21, 2007, 01:49:56 PM »
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  • You kidding? We're paying £5 a gallon here in the UK! Which is about ten dollars!

    You guys have it good, our fuel costs are completely extortionate.

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    Offline Matthew

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    Do all your shopping now -- $4 gas coming!
    « Reply #2 on: November 21, 2007, 02:54:08 PM »
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  • I realize that -- and it's often brought up.

    HOWEVER...the USA is NOT England or Europe.

    What difference does that make, you ask?

    Well, for starters we have NON-EXISTENT mass transit in many places, or else it's a joke. We don't have train/subway service except within our biggest cities. Even San Antonio, TX only has some sporadic bus service -- and that's a pretty big city!

    To buy food, manufactured goods, etc. it requires AT LEAST a 10 minute drive -- no convenient bus, train, or subway service is available. Everything is very spread out here. In fact, the "suburban" way of life was designed around CHEAP gas -- back in the 50's when gas was dirt cheap.

    No, over here we all have to drive cars -- and the USA is a BIG country -- our goods, etc. have a long way to travel.

    On the east coast there might be a few subways, train lines, etc. but most of the country relies on cars.  

    And the fact is that people are ALREADY cutting back heavily on their spending as of today -- with $3 gas. Heaven help our economy when it hits $4, $5, or $10.

    Matthew
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    Offline Adesto

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    Do all your shopping now -- $4 gas coming!
    « Reply #3 on: November 21, 2007, 04:00:48 PM »
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  • Good points, Chant, I hadn't considered all the differences properly. I guess its relative to the amount you have to drive. However, most British people have to commute too, as business centers and residential areas are usually separated out. I do agree that you guys have a lot more driving to do than us.

    As fuel prices rise, so will delivery costs. Items on shop shelves will rise as a result (at least here they do). It seems to be a downward spiral.

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