Experts: Gas Prices Will Hit $3 Per Gallon By January

Oil prices ticked up 19 cents Monday to finish at $89.38 per barrel on the New York Mercantile Exchange—the highest close for crude since Oct., 2008.

Cold weather in the Northeast has led to high demand for heating oil, and investors were also spurred by rumblings that the Federal Reserve may soon prepare a new round of monetary easing aimed at jump-starting the economy—a move that would put further upward pressure on oil.

At the pump, prices have jumped along with crude over the past month—despite consistently low consumer demand for gasoline. In much of the country, prices have risen by more than 30 cents compared to a year ago, with parts of the Northeast experiencing a hike of more than 40 cents.

Analysts say that if crude oil prices hold steady in the $90 range, the national average cost of a gallon of gas could hit $3 by the end of the year—though consumers in many parts of the country have been paying at least that much for most this year.

According to analysts at Cameron Hanover (as reported by the Associated Press), for every penny the price of gas goes up, Americans spend an additional $4 million on oil. And as The Atlantic‘s Lisa Margonelli points out, higher gas prices could put a significant strain on any potential economic recovery:

“This is a big hemorrhage of money that could be put to other uses that would boost our economy… A jump in the price of gas will fall disproportionately on the shoulders of the middle class. Families making $50,000 a year already spend an average of $7,900 annually on their cars, maintenance and fuel, according to the GAO. That’s more than they spend on taxes or health care—two costs the Republicans and Democrats have made their respective signature issues.”

Lisa Margonelli, The Atlantic

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  • Anonymous

    $3 a gal??? consider yourself lucky… canada already hit $3 last year and $4 for at the last month or so.

    ($1.12 CAD/L = approximately $4.21 per US Gal with the current exchange rate)

  • Anonymous

    That’s nothing, in Europe we pay about $8…

  • Anonymous

    i can understand europe being expensive considering it does not produce oil like canada…

  • David

    Umm.. Europe produces a lot of oil – ever hear of the North Sea?

  • Charles

    We have competing interest in the US. Our society has grown up with cheap gas. Spikes in the price cause a real shock to our economy. A shock that as the article points out hits those who do not have the resources to react quickly.

    We also need to cut our use of oil for national/global reasons. Personally I think we need to cut oil use to reduce the effects of man made climate change. Others primary reason is for national security. We send a lot of money to countries whose people really dislike us.

    A lot of us have made very poor choices in vehicles. Not many people need a 260 plus HP family car that gets 21 MPG when the same car at 175 HP is 26 MPG (24% better), or as a hybrid 39 MPG (86% better). Not to mention the people who drive 6000 pound behemoths because they think they are safer at all of 15 MPG.

    We really need the price of gas to go up in a slow predictable way so that all of us can adapt. A gas tax that goes up one or two cents a month for few years would push people to make better decisions about their next vehicle, without causing too much of a shock now. The tax still hits the middle and lower income people the hardest, but these are the people who own most of the cars. If their buying decisions change the tax will hurt them less. In the above example of going from 21 to 26 MPG, gas could go from $3.00 to $3.71 and the persons fuel cost would be the same.

  • 55mpg

    I think gas prices ($3.12 in my area) are still very cheap. I see a family every day on the school parking lot, waiting there for more than 15 minutes with their SUV’s engine idling.

    Gas prices are high, when consumers stop idling their cars. Gas prices are high, when the number one criteria for car buyers is mpg. Neither of the above situation has happened yet. So I feel gas is way too cheap even at $3.12. A comfortable price is in the the $5 per gallon range.

  • DHS

    All we can do ladies and gentleman is prepare ourselves for what we know is comming. The governments won’t know what hit us… again… until it’s going to be too late. Our debit will be at it’s maximum at the time we smash our heads against the ceiling of our natural resources.

    Sadly, the majority of the public does not realize this. At least I can say that the people who buy fuel efficient vehicles already understand the basics of our problem.

  • JamesDavis

    Yes, “55MPG”, $5.00 a gallon is very reasonable for people like you who have money to throw away than brains to know how to use it, but the common worker, who you said owns the most cars, would not be able to drive to work or afford to purchase a more fuel efficient car. The return on that is, “Auto sales would drop like a lead balloon and the auto industry would collapse like it did in the last decade.”

    With the over inflated price of electrics and hybrids, there is no way the common worker in America, with gas prices at their current flux, can afford to buy one to get away from the roller coaster gas prices. We need to take all this money we are giving to countries that hate us and want to kill us and use it to start mass producing electric cars and make them affordable so the common worker, which is the greatest majority of America, can again afford to drive to work and feed their families at the same time. With the rising gas prices this becomes impossible for the common worker to do both.

  • abasile

    I agree with 55mpg. The “common worker” can always buy a used hybrid for a reasonable price. Personally, I see plenty of working people buying oversized pickups and SUVs that they can barely afford.

  • Charles

    James, I am the one who said lower and middle income people buy the most cars. I also said that if the price of gas would rise in a slow predictable manor, these people would make better decisions about their cars. The example I gave of going from a V6 Fusion to an I4 Fusion (not the hybrid) would save a person driving 15,000 miles a year enough to pay the higher gas price if the price went up two cents a month for three years.

    If people knew that gas was going to be at least a $1.00 a gallon more when it is time to replace a new car, their decision would weigh MPGs more significantly. This would help all of us including the auto companies. Spikes kill, predictability saves.

  • Anonymous

    This is expected. Every day 40,000 new vehicles are hitting Chinese Roads. Oil Production in North Sea and Mexico are declining.

    Knowing these troubles, Saudi Arabia is increasing the price of Crude from Jan-2011 and they are saying that $90/barrel is correct price.

    Although Americans have moved gradually from Truck based SUVs with V8 engine to Car based CUVs with V4 & V6 engine, still we have lot of gas-guzzlers.

    Instead of howling, we can just start trading our gas-guzzlers for smaller vehicles. If you feel that sedans offer little space, then go for Wagons.

    Flexfuel vehicles are another choice. Read this article as how efficiently we can produce Ethanol using the agro waste.

  • Anonymous

    Worldwide there are 20 million Flexfuel vehicles. While those in Brazil make use of Ethanol, those in US still use only E10 since most gas stations sell only that fuel.

    Increasing Biofuels from current 1.9 million b/d to higher levels will send a message to OPEC.

    Also there 7% of the US households use Oil for Heating, its high time they switch over to natgas or electricity and also conserve by reducing the temperature when not in use.

  • crystaldawn

    Even those of us that drive hybrids dont want to pay $5 a gallon. I bought a hybrid to save money on gas and while I average over 40 mpg still have to buy gas at the same prices everyone else pays. I am a single mother supporting my daughter and 2 disabled people in my household. I pay all these stupid taxes just like most americans and wish the government would just get their acts together and bring down some savings to the AVERAGE american.

  • Anonymous

    crystaldawn : You made correct decision by buying a hybrid.
    If your home is heated with Oil, try to move to natgas or electricity which costs only half of that.

    Also set the temperature to 60 degrees at night and switch on portable heater in bedrooms. This will bring a big savings.

    Unfortunately we were taught only to spend and not to save.
    Hope the next generation learns to save and make life affordable.

  • abasile

    @crystaldawn: If the federal government increases gasoline taxes to the point that gas is five dollars a gallon, then I think they should reduce taxes in other areas. The goal should be to reduce oil consumption, not make life harder for working families.

  • Charles

    I agree with abasile that the government should reduce taxes as revenue comes in from the increased fuel tax. That reduction should be a general reduction of middle and lower tax brackets or more of a cash for guzzlers program to help offset the cost of buying a new or used more efficient car. There should not be a tax credit for individuals as that would just offset the incentive to buy efficient vehicles. Businesses should be get a tax credit of a significant part of the tax increase.

    The devil is always in the details.

  • Anonymous

    Biofuel is NOT the solution. If most of the cases it take more energi to produce it than it contains…

  • Eddie

    How about gas at 79 cents a gallon….

  • Anonymous

    as much as dislike bio fuel, some day we may not have a choice but to rely on it because we can’t get ourselves off the gas addiction.

    of course there is always an option of choosing severe addiction withdraw in the form of economic depression…