SOUTH BEND — The latest round of winter weather made for another tricky commute Thursday. But soon, drivers may be feeling even more anxiety at another place: The gas pump. Oil prices went up again Wednesday, topping $83 per barrel for the first time in 15 months. The latest run-up followed the release of minutes from a closed-door Federal Reserve Bank meeting in December concerning a federal mortgage securities buyback program. Pump prices followed the jump in crude prices so quickly that some economists and industry analysts now believe gas could approach the $3 per gallon mark in the South Bend area by the end of this weekend. It wasn't the news drivers wanted to hear as the latest round of "climate complication" hit area roads Thursday. "We're already slipping, sliding every which way, and my truck is a gas hog. So, that doesn't make me feel very well," said Rachael Hanson of South Bend. "I knew they were going up, but not that high," agreed Kathy Kersh of South Bend. But, many drivers had already found out prices were rising.
- Gas prices in Indiana averaged $2.74 per gallon for regular unleaded Thursday, according to the AAA Fuel Gauge Report.
- Michigan's prices averaged one cent higher at $2.75 per gallon. According to AAA, only 13 states had higher pump prices. Richard Gonzalez paid $2.77 per gallon to fill up his SUV Thursday in South Bend, and said he noticed the difference right away. "I put $10 in, and it probably only gave me a quarter of a tank. Filling it up like this would cost me close to $60 from empty," he said. Over the last week, pump prices nationally have jumped 20 cents to an average of $2.71 per gallon, surging past all 2009 highs. According to an Associated Press analysis, the average driver using 50 gallons of gas per month will now pay $135 to fuel up every 30 days. Last year at this time, that figure was $85. Experts say there's no short term sign they'll stop there. "Sure, we could see ($3 per gallon gas) by this weekend," said Notre Dame Economics Professor Dr. Thomas Gresik, who studies trends in the oil markets. "We're on the uptrend right now. But, the question is — how much of it is short term, and how much of it is long term? Is there a general trend that's pushing prices in that direction? Not right now." So what is fueling the increase? For starters, the wicked winter weather that's gripped much of the nation, and the world. "Almost the entire Northern hemisphere has had extremely cold winter weather. And that's going to particularly affect oil prices, which are determined worldwide. Europe and Asia have been hit hard," said Gresik. Frigid weather across the globe has put a squeeze on supplies of heating oil, contributing to the boost in crude oil prices. But, other "longer term" concerns have analysts even more worried. Among them:
- The recent shut off of oil supplies between Russia and Belarus;
- The closure of three main oil import terminals in Mexico because of bad weather; and
- A refinery fire in Louisiana that shut down production for weeks. Other refineries aren't doing much better. Several have been shut down for maintenance on the West coast, and with crude prices up and consumer demand down, those that are still running are operating at just 80 percent average capacity. Gresik says, in many cases, that's not by necessity, but by choice. "Those prices (in the low $2 range) aren't sustainable. Because the refineries are losing money on almost every single gallon they refine. That's why we've seen refinery capacity go down,": Gresik says. " When you have a significant amount of refining capacity taken out of circulation on a short term basis, you're going to see higher prices" he noted. Speculators are also hedging their bets on higher prices, but Gresik says that won't affect the final pump price as much as some might think. "There's this misconception that futures trading activity is what's driving prices. That's a very, very small component of what's going on," Gresik said. Over the last few years, refineries have combated thin profit margin by boosting their spring prices between about 20 percent and 55 percent as they switch over to the more environmentally friendly, government mandated "summer blends." If that trend continues, some economists believe prices at the pump could approach $4 dollars per gallon by this summer. "Can prices hit $4 a gallon by the middle of the year? Perhaps," said Gresik. "But, I think what's more important is to take a longer term view and ask what we're doing as a country to try to insulate ourselves against big fluctuations in prices." With enough winter weather heartburn on the roads already this week, it's not the news drivers wanted to hear. Still, the truly deep pain may still be a few months off. Gresik expects prices to drop well below $3 per gallon within the next few weeks. "As gasoline prices go up, you'll start to see more refineries coming back online. And, that will moderate the price increases," he said. Even so, some drivers say they're already planning for a big change. "If it goes to $4, it'll probably cost me over $100 to fill up," said Gonzalez. "We'll probably have to drive less." "That will definitely affect where I drive and how I drive," agreed Hanson. Check area gas prices at gasbuddy.com