At $3.53 a gallon, prices are already up 25 cents since Jan. 1. And experts say they could reach a record $4.25 a gallon by late April.
“You’re going to see a lot more staycations this year,” said Michael Lynch, the president of Strategic Energy & Economic Research. “When the price gets anywhere near $4, you really see people react.”
The surge in gas prices follows an increase in the price of oil.
Oil around the world is priced differently. Brent crude from the North Sea is a proxy for the foreign oil that’s imported by U.S. refineries and turned into gasoline and other fuels. Its price has risen 11 percent so far this year, to around $119 a barrel, because of tensions with Iran, a cold snap in Europe and rising demand from developing nations. West Texas Intermediate, used to price oil produced in the U.S., is up 4 percent to around $103 a barrel. That’s 19 percent higher than a year earlier.
A 25-cent jump in gasoline prices, if sustained over a year, would cost the U.S. economy about $35 billion. That’s only 0.2 percent of the total economy, but economists say it’s a meaningful amount, especially at a time when growth is only so-so.
Gas prices are already an issue in the presidential campaign. Republican candidate Newt Gingrich spoke several times this week about opening up more federal land to oil and gas drilling as a path toward U.S. energy independence – and lower pump prices.
High oil and gas prices now set the stage for even sharper increases at the pump because gas typically rises in March and April.
The Oil Price Information Service predicts that gasoline could peak at $4.25 a gallon by the end of April. That would top the record of $4.11 in July 2008.