Summer's here. So are higher gas prices

[24KT]

Summer's here. So are higher gas prices
But 15% runup in past 3 weeks pales in comparison
to 2008's surge, and isn't likely to match the record highs
By Julianne Pepitone, CNNMoney.com
Last Updated: May 21, 2009: 2:51 PM ET

NEW YORK (CNNMoney.com) -- With the Memorial Day weekend and summer driving season approaching, motorists are facing a familiar trend -- surging gasoline prices.

But while pump prices have increased more than 15% over the last 23 days, and are likely to go even higher over the coming weeks, experts don't foresee anything like the record levels of 2008.

"An overall increase is not abnormal for this time of year," said Bob van der Valk, a fuel-pricing analyst with 4Refuel Inc. in Lynnwood, Wash. "It will follow a similar trend, just starting at a lower price than 2008 did." He also cited recent refinery fires in California, Pennsylvania and Illinois, curtailing supply, as a reason for the current spike.

The national average price for a gallon of regular unleaded gasoline increased Thursday to $2.362, up 2.8 cents in a daily survey compiled for motorist group AAA. That's the 23rd consecutive increase, during which the price of gas has increased 31.4 cents, or 15.3%. All 50 states and the District of Columbia have regular unleaded gas prices of $2 and higher.

But the surge in prices is somewhat relative. The average price is down 38% from the $3.807 per gallon AAA reported one year ago. And it's down $1.75, or 42.5%, from the record high of $4.114 set last July 17.

Gas prices could increase to $2.41 this weekend, said Tom Kloza, publisher of Oil Price Information Service.

"That would be an astounding 50% increase from November," he noted. "We have never seen a similar percentage increase from winter to spring."

As a result of the comparatively lower prices, van der Valk said he expected Americans will drive more this summer when they take time off. That wasn't the case last year, when prices at the pump were volatile. Soaring prices curtailed travel, and by July 17 gas prices had risen already 35% year-over-year.

Consumers finally began to see a reprieve in August. But late summer brought Hurricanes Gustav and Ike, and gas prices shot back up in September, reaching more than $5 per gallon in some parts of the country. On Sept. 16, gas prices started declining amid weakening demand as the global economic slowdown took hold.

Barring major hurricanes or other unforeseen events, van der Valk expects the average price to peak around $2.75 by Labor Day. California and other West Coast states could see prices spike as high as $3, he added.

Kloza doesn't see quite as big a spike.

"If you believe in $3 gas, you believe in the Dow going back to 10,000," he said. "Fundamentals are the only way prices will move higher -- and I don't see that."

Instead, Kloza predicted average national prices will peak this year around $2.50 --and "we may be really close" to that level, he said. And then, the cycle heads downward again. "It could go below $2 by Christmas," van der Valk said. "People will say, 'Great, the gas companies are giving it away again.'"

[Purge_WTF]

  It's gone up like twenty cents here in the past two weeks alone. Here we go again.

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$60 - oil's sweet spot
Rising crude prices shouldn't derail any economic recovery, and may prevent a super spike later on.
By Steve Hargreaves, CNNMoney.com staff writer
Last Updated: May 22, 2009: 8:18 AM ET



NEW YORK (CNNMoney.com) -- You've probably noticed it at the gas pump.

$1.88, $2.01, $2.21. Price data from the government over the last few weeks clearly show gas is on the rise. On Thursday it averaged $2.36 a gallon, according to the motorist organization AAA.

Gasoline prices rise with oil prices, which have also been on the march lately. On Wednesday they settled above $60 a barrel for the first time in six months.

There's been talk that these rising oil and gas prices may derail any budding economic recovery, as consumers put more money in their tank and less into their local economy.

But most experts say $60 oil isn't too much of a burden, and this mid-range price could ultimately prevent future spikes.

"This is a price level the U.S. economy can shoulder," said John Lonski, chief economist at Moody's Analytics. "It will not figure into the timing of the recovery."

The economy

Talk of a budding economic recovery isn't just talk, there are concrete numbers backing it up.

While unemployment remains high, fewer people have been filing new claims. Leading indicators ticked higher in April. And the Treasury yield curve is widening. Oil prices, which have been tracking the stock markets lately, rose mostly on news like this.

It's not unreasonable to think rising oil prices could snuff out these signs of hope. Unlike previous recessions, oil prices are much more closely aligned with stock prices, as commodities have became a popular investment vehicle.

"People think the price of crude is reflective of fundamentals, but more and more it's reflective of the economic expectations of the financial community," said Tom Kloza, chief oil analyst for the Oil Price Information Service, which gathers data for AAA.

This isn't necessarily a bad thing, but it does mean oil prices now rise along side stocks, which generally rise on the expectations of a recovery, not when the recovery actually kicks in.

Back to basics

But this aside, oil and gas prices are still well below where they were last year, and probably have substantial room to go higher before they start to hit consumer spending or sentiment.

Lonski said it would take gas around $3 a gallon, and oil prices near $100 a barrel before it had a wider impact on the economy.

Fortunately for drivers, and maybe the wider economy as a whole, most analysts don't think we're going there anytime soon.

For one thing, even though expectations of a recovery are higher, the fundamentals for crude remain terrible. There's much more supply than demand.

For another, oil and gas prices always rise this time of year in expectation for the summer driving season, so this recent gain isn't unexpected.

The rise this year has been the largest in history on a percentage basis, with retail gas prices up almost 50% since late last year and gasoline futures prices up a whopping $138%, said Kloza.

Because of this huge runup, and with summer driving season almost here, he thinks the price rally may be done.

"The numbers we saw yesterday might be the spring peak," said Kloza.

If he's right and oil doesn't runup too much higher or fall too much lower, it could be a blessing for everyone.

Oil at $60 a barrel, as opposed to the high $30s we saw earlier this year, is good if you're hoping for an economic rebound.

"It testifies that the world economy isn't falling into an abyss," said Lonski.

Moreover, $60 is generally the lowest number oil can sell for that will keep oil companies and countries working to bring new sources to market, said Adam Sieminski, chief energy economist at Deutsche Bank.

"You need $60 to get new investment," he said. "The longer you stay below $60, or even $80, the greater the potential for oil prices to spike and create problems for everyone two years from now."

So $60 seems to be a sweet spot for crude. But as Sieminski was quick to note, oil rarely stays at one price for long

[Soul Crusher]

Its called inflation.  People are fleeing the dollar and going into commodities and tangible goods because the dollar will soon be worthless with all the fiat money the Fed is printing.