Washington : “Too much, it’s killing us,” small-business owner Victor Battle complained while reading a report predicting gasoline prices are widely believed to rise because of soaring oil prices.
Battle, who operates a cleaning service with two vehicles, said he’s cut down on his non-business driving to absorb the higher costs for his business.
“I stay home more and don’t drive as much,” he said.
With crude oil prices hitting $100 a barrel for the first time last Wednesday, analysts predicted higher gasoline prices are probably inevitable.
“If the oil price stays this high, it could lead to extremely high gasoline prices in summer, more than $4 a gallon,” said Bryant Gimlin, energy risk manager at Fort Lupton-based Gray Oil Co., a wholesale distributor of gasoline and diesel.
“Right now, it looks like it will be a very painful summer” for US drivers, he added.
The average retail price for US gasoline was $3.05 Wednesday, 18 cents cheaper than the record of nearly $3.23 a gallon last May.
In December, the US Energy Department’s Energy Information Administration (EIA) forecast that the national average price for regular gasoline could peak at around $3.40 a gallon in May.
Oil prices typically rise in the spring and early summer as refineries gulp stocks to make gasoline for vacation driving.
“We’re not forecasting $4 a gallon nationally,” said EIA analyst Douglas McIntyre, but high-priced areas such as California could see that mark before long.
For Battle, staying home is not the only way to deal with the approaching high prices.
At some point, Battle said he’ll have to pass along the cost to his customers in the form of higher prices, and hope they will pay it and not look for someone else to do the work for less.
Yulvonca Wilson said her family has already cut back on outside activities to afford the $40, twice-a-week gasoline bill incurred by two adults using the same car to commute.
“We used to go movies at least once a week with the kids,” Wilson said. “We’d do Putt-Putt. We’ve cut back on a lot of things because you have to get to work.”
Analysts said consumers, whose spending is critical to economic growth, have held up well so far, even with gas already having climbed above an average of $3 a gallon.
“These higher prices will flow throughout the economy,” said Tim Evans, an energy analyst at Citigroup Inc. “The more difficult question would be to find a product that does not have an energy component.”
As oil prices keep skyrocketing, more people are worried about a possible recession.
“The higher the oil price goes, the more likely recession becomes,” Standard & Poor’s chief economist David Wyss said in a recent note to investors.
“The average American household will spend 5.7 percent of after-tax income on energy. That is up from 4.2 percent in 2002 and from the record low of 4.1 percent in 1998, but well below the 7.9 percent peak of 1981,” he said.
Geoff Sundstrom, spokesman for the American Automobile Association (AAA), said a strong economy had protected US consumers from oil spikes that occurred early this decade.
However, the current sub prime crisis and weak dollar could amplify the impact of extended high oil prices, hitting US consumers in ways not seen since the recessions of the late 1970s and early 1980s, he said.
“It is worrisome from the standpoint that the US seems to be entering a slow growth period for the economy,” he added.