Higher Gasoline Prices on the Way

It's that time of year again. Crude oil prices have risen to $100 a barrel and gasoline prices have been moving up since February 3, 2014. A month ago crude was about $93 a barrel. Analysts predict that refineries will begin reducing production to perform maintenance and to switch to EPA mandated summer gasoline blends.

The good news? It's unlikely that Illinois gasoline prices will reach recent
February peaks of:

• 2013 $4.24 peak
• 2012 $4.28 peak
• 2011 $4.34 peak 

Currently the average price of gasoline in the US is $3.34. In Illinois, regular gas is average $3.481 per gallon according to AAA.

In Wheaton, the lowest regular gasoline prices today were $3.35 a gallon (go to gasbuddy.com).That's better than the prices of $3.95 one year ago today.

Inflation Update - As Applied to Gasoline

Here's an update to the price of gasoline, posted several times on this and another blog. 


I'll repeat some of that post here, with an updated chart. 


Last year, there was a lot of talk about "deflation" and this caused some to think prices were dropping. Some did, but many prices did not, and gasoline is one that has trended upwards and reached a peak in 2008, and then plummeted before recovering in 2007. Prices today are about where they were in spring of 2007. 


My chart has some short term 'ups and downs' which are small vertical lines. These are attributable to business road trips, during which I purchased gasoline at lower prices in other states. All of those purchases are included here.  

This is based upon the gasoline receipts for one of my automobiles. As I have stated previously, I collect data on certain things. In finances, that includes my household's "consumption and spending habits". I use several tools; this chart was created using data entered in a spreadsheet. I update it monthly using my gasoline receipts. Why do this? If you don't, won't or can't measure something then you certainly can't control it. Or, as we used to say in the early days of mini-computing "garbage in = garbage out". Some truisms are universal, but we are at a point in our development as a culture where we have forgotten how we got to where we currently are. Too bad for us and our future generations.

There are two lines on the graph. The red line is the actual price of gasoline from the period February 3, 2005 through January 20, 2011. The black line is a trend line, which displays the actual trend in prices and as you can see, is trending continuously upwards. I also calculated the average of prices on an annual basis and compared those averages to determine the price increase per year. These annual price increases were then compared to determine the percent price per year.

Average cost per gallon annually was:
2005 = $2.50
2006 = $2.74
2007 = $3.04
2008 = $3.24
2009 = $2.82
2010 = $2.98
The interesting thing here is that the price of gasoline has been increasing at a rate of about 2.2% per year, which is in line with the very low inflation we had been experiencing. However, gasoline prices today are about 11% higher than they were at this same time, last year. Does that signal an increase in inflation? We know that the floods and weather issues around the globe will depress crop yields. That should result in price increases at the grocer.


Average inflation is usually in the range of 3.0 to 4.0% per year.  The averages, however can be deceiving. Do you remember the angst in 2007 and 2008 when gasoline prices "spiked"? Peak price I paid per gallon was $4.419. Even so, the average increase in gasoline prices per year, 2005 to the present, are low, less than 3% annually! What this means to the consumer it that when economists speak of "averages" it is useful to be aware that these averages can include severe periods of higher or lower numbers. So while the average is benign, the spikes are painful. Moral: "Be Prepared". Today's low prices may be replaced with higher prices in the future and may include price spikes. So don't spend those savings acquired by low prices. Save them for the day when prices return to the normal rate of inflation, which is possibly as near to today as those July 2008 price spikes. If they are, then we could again face more steeply rising prices in the summer. As the "experts" say, economics forecasting is not an exact science. 



The government also adjusts the methods for calculating inflation. Today's low 1.5% inflation, if calculated the way the government did it in 1990, would be reported as 4.5% inflation. If we used the methods available in 1980, then inflation would be reported as 7.5%. So at times, the "official" government inflation figures can be deceiving. I won't comment if this is deliberate or not. That's a matter of opinion.

References, Errors, Omissions, Comments:

1) Inflation was running about 2.0% per the government CPI-U. However, it has dropped recently and is now reported at 1.5%. We'll see what the January numbers show. You'll note that gasoline has trended upward since fall. The vertical red lines in the fall and again in December 2010 were due to lower prices during business trips. Gasoline in our area did not decrease in price. 

2) Click this link for other posts on the "inflation" topic:

http://briarcliffelakes.blogspot.com/search/label/Inflation

Summer Gasoline Price Increases

You may have noticed that gasoline prices have been increasing.  In December 2009, we were paying about $2.699 for a gallon of regular. Gasoline prices are expected to increase "slightly" this summer. According to the EIA (Ref. 1), gasoline will cost, on average, about 49 cents per gallon more this summer than it did last summer. Their information states that gasoline cost $2.35 a gallon in summer 2009 and is expected to cost $2.84 this summer. These are average prices, and our prices are higher.

The EIA uses April 1 through September 1 as the summer months. Here is a quotation from the report:

"The forecast has the annual average regular grade retail gasoline price increasing from $2.35 per gallon in 2009 to $2.84 in 2010 and to $2.96 in 2011, primarily because of projected rising crude oil prices. Average U.S. pump prices for regular gasoline are likely to exceed $3 per gallon at times during the driving season, and already exceed $3 per gallon in some areas."

Our gasoline prices are higher than the EIA average. Currently (6am today prices), the price of regular gasoline ranges from $2.999 to $3.109 per gallon.  In December 2009, we were paying about $2.699 for a gallon of regular. This was a reduction from June 2009 price of about $2.969 per gallon.

Here is a site which features gasoline prices in various zip codes. I have entered the zip 60187. I encourage all residents to purchase gasoline at stations located within our town borders. A portion of the taxes collected returns to the community to pay for our services:
Link to Gasoline Prices Zip 60187

Comments, Corrections, Omissions, References
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(Ref. 1)   Link to Energy Information Agency Short Term Outlook

2. This information is provided as an aid to those who are budgeting.

Inflation Update - As Applied to Gasoline

Here's an update to the price of gasoline, originally posted on September 5, 2008 at another blog:

Link to Gasoline Prices September 2008

This is based upon the gasoline receipts for one of my automobiles. As a hobby, I collect data on certain things. In finances, that includes my household's "consumption and spending habits". I use several tools; this chart was created using data entered in a spreadsheet. I update it monthly using my gasoline receipts. Why do this? If you don't, won't or can't measure something then you certainly can't control it. Or, as we used to say in the early days of mini-computing "garbage in = garbage out". Some truisms are universal, but we are at a point in our development as a culture where we have forgotten how we got to where we currently are. Too bad for our future generations.

Some background information:
Total miles driven = 79117
Total gallons used = 3480.1312

There are two lines on the graph. The red line is the actual price of gasoline from the period February 3, 2005 through March 12, 2010. The black line is a trend line, which displays the actual trend in prices and as you can see, is trending mildly upwards. I also calculated the average of prices on an annual basis and compared those averages to determine the price increase per year. These annual price increases were then compared to determine the percent price per year.

Average cost per gallon annually was:
2005 = $2.50
2006 = $2.74
2007 = $3.04
2008 = $3.24
2009 = $2.68

The interesting thing here is that the price of gasoline has been increasing at a rate of about 2.2% per year, which is in line with the very low inflation we have been experiencing. Average inflation is usually in the range of 3.0 to 4.0% per year.  The averages, however can be deceiving. Do you remember the angst in 2007 and 2008 when gasoline prices "spiked"? Peak price I paid per gallon was $4.419. Even so, the average increase in gasoline prices per year, 2005 to the present, are low, less than 3% annually! What this means to the consumer it that when economists speak of "averages" it is useful to be aware that these averages can include severe periods of higher or lower numbers. So while the average is benign, the spikes are painful. Moral: "Be Prepared". Today's low prices will be replaced with higher prices in the future. So don't spend those savings acquired by low prices. Save them for the day when prices return to the normal rate of inflation, which is possibly as near to today as those July 2008 price spikes. If they are, then we could again face rising prices in the summer of 2012, or sooner. As the "experts" say, economics forecasting is not an exact science.

========================================================

References, Errors, Omissions, Comments:

1) I added additional information regarding annual increases and an explanation of the trend line or "Linear" line on the chart.  

2) On April 13 I updated the actual miles driven and gallons purchased.