The national gas price average climbed to another new record at $3.365 Friday (April 11), according to the Oil Price Information Service.  This was the most recent in a sequence of several weekly record prices.  Oil set a new record high above $112 per gallon earlier in the week, which along with the pending summer driving season have helped drive gas prices higher.

The new record gas price comes amid reports forecasting expectations of a national average peak of $3.60 this summer.  While this would mean continued growth of about a quarter, some Americans would be content if this peak price does play out.  Some high end projections still suggest $4 per gallon is possible.

California residents are already suffering with prices much higher than the average.  Even if the national average peaks at $3.60 this summer, it is likely California would see $4 on average. 

It is not just motorists that are struggling to cope with the continue rise in fuel prices.  Many businesses that rely on large semis and trucks, as well as trains and boats for transportation of goods, are finding it more difficult to control costs.  Larger vehicles eat through fuel much more quickly.  Diesel fueled vehicles are even more expensive to maintain.  Diesel set a new high Friday as well, reaching $4.066.

Oil did drop a bit following its peak at $112.21 to close just above $110 Friday.  There does not seem to be an end in the near future for the resilient climb in oil prices.  Supply projections indicate a likelihood of price growth. 

The dollar has been showing some signs of fighting back in recent weeks, but it continues to fall under pressure with negative housing, credit, and earnings news.  It closed the week up on Friday against most of the major currencies, including the yen and the Euro.  The dollar plays a key role in oil and other commodities.  With a weak dollar, many speculators invest in commodities to hedge against the weak currency.

If the dollar is able to gain momentum during the second half of 2008, it is quite possible oil could see a strong reversal, which would definitely lead to better fuel prices.  Many economists remain hopeful that Fed rate cuts and the tax rebates coming in May could help spark the turnaround.  Unfortunately, down earnings and continued negative housing and credit news are restrictive to growth in consumer confidence.

The good news for many Americans is that spring temperatures should be warming in the next few weeks.  Several Midwestern states have seen unseasonably cold starts to April, with snow continuing to fall in much of the north and north-central portions of the country.  Warming temperatures reduce reliance on natural gas for home and business heating.  The drop in natural gas use should help offset this summer’s record gas prices.

With the rise in gas prices, many consumer groups are posting economy driving tips for motorists.  Most advise drivers to slow down a bit on the highway in order to lower fuel usage.  A recent report showed that slowing from 70 miles per hour to 60 miles per hour on the highway is equivalent to a savings of 54 cents per gallon of gasoline.  It seems drivers can affect gas simply by driving safer.  Most Americans seem hesitant to slow down, however.

It is important for Americans to remain calm if gas prices do continue to climb this summer.  While many economists have suggested gasoline prices have been catching up with inflation over the last couple years, at some point, oil and gas are likely to pull back somewhat.  The dollar is bound to bounce or recover when the economy begins to recover.  Dollar improvement should reduce oil speculation, and lower gas prices.

Market Recap

Stocks were up slightly Thursday, following a mixed bag of economic news.  The Dow was up 54 points on the day.  The NASDAQ and S&P climbed as well, up 29 and 6 points, respectively.  Retailers announced poor March retail sales.  There was an increase in US trade deficit.  US equities dropped sharply Friday as word circulated that major world powers were working on a plan to prevent global credit crises similar to what the US is facing.  The Dow dropped 256, while the NASDAQ and S&P were off 61 and 27.  Gas prices set a new record as oil moved higher.  GE hurt the market with a lower first quarter profit and a reduced outlook.

Neil Kokemuller
Friday, April 11, 2008
7:30 PM EST

Neil Kokemuller is an Associate Professor of Marketing at Des Moines Area Community College in Des Moines, Iowa, USA.  He has a MBA from Iowa State University with a specialization in marketing.

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