On Sunday, the newest Lundberg Survey reported that the national average gas price reached exactly $4 per gallon for the first time since July of 2008. The mark was reached a full three weeks before Memorial Day, the unofficial start of the summer driving season, a period in which gas prices typically reach yearly highs.
Because of a large regional disparity in prices, $4 gas is nothing new to drivers in much of the country. In Chicago, which Lundberg ranked as the city with the most expensive gas at $4.50 per gallon, the price has been above $4 since early April. (Tucson has the cheapest gas according to the study, at $3.62 per gallon.)
But however superficial the milestone, the recent rise in gas prices—which hovered near the $2.80 mark just a year ago—has dramatically changed the purchasing decisions of American car buyers. Smaller, more fuel-efficient offerings like the Chevy Cruze and Ford Fiesta are flying off of dealer lots, and the market for hybrids has heated up significantly as well. According to a recent Consumer Reports survey, 92 percent of drivers said they wanted better fuel economy out of their next vehicle.
The arrival of $4 gas is also putting pressure on politicians to respond. Unfortunately, there’s not much that can be done in the short run. Proposals to push fuel economy standards to 62 mpg by 2025 will have little short-term effect. After all, 2025 is 14 years away. New drilling, if that’s your bag, will take at least that long to have an impact. (Who knows what a gallon of gas will cost half-way through the next decade?)
The more immediate and desperate question on the minds of many consumers and industry watchers alike is, “Will $4 gas last?” In 2008, average gas prices reached a high of $4.05 in July, only to fall to $1.59 by year’s end. As prices rose, carmakers scrambled to speed development of cars with new fuel-saving features, only to find that the market for those cars had softened substantially by year’s end thanks to falling fuel prices and a suffering economy.
This time around, many analysts do see a leveling off in prices on the horizon thanks to a recent decline in crude oil prices. “We may see a drop of a dime or more before Memorial Day,” said Trilby Lundberg to CNN
When $4 gas hit the last time, it was a shocker worthy of front page headlines. Anybody surprised by this re-visit to $4 gas has a serious case of amnesia. Nobody can predict where gas prices will go from here. But to overlook that $5 is real possibility in the next year or two—and to buy a new car assuming that gas prices will repeat 2008’s return to earth by the end of year—is to ignore the new reality of cars, energy, and the global economy.