A painful price point for drivers

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Gasoline price hits 780-day high in Virginia — the highest ever for gas during the holiday season.

Never before have motorists paid $3 for a gallon of gasoline at Christmastime.
Unless things change, that could soon happen across the nation, according to the American Automobile Association’s “Daily Fuel Gauge Report.”

The cost of gasoline on Wednesday continued to soar to a two-year high in Virginia, averaging $2.88 a gallon, a price not seen in 780 days.
Meanwhile, the national average price for a gallon of unleaded regular climbed to $2.97 a gallon overnight, just pennies away from the dreaded price threshold, according to AAA Mid-Atlantic. The last time the country had a national price average above $3 a gallon was mid-October 2008.
“Consumers have an intuitive disdain for $3 gasoline,” said Martha M. Meade, AAA Mid-Atlantic’s manager of public and government affairs. “The timing of this couldn’t be worse, coming during the Christmas shopping season and when consumer confidence is already listless.
“Let us not forget, the last time gas prices spiked like this, the recession kicked in. Research shows that consumer confidence has not completely rebounded.”
A sampling of prices for a gallon of self-serve gasoline on Wednesday: Virginia, $2.88; Roanoke, $2.80; Richmond, $2.85; Norfolk, $2.85; Charlottesville, $2.87.
Although it is too soon to tell, a rise in fuel prices could discourage travel during the five busy travel days around Christmas, Meade said.
For example, travel was down 4.6 percent last Christmas in the commonwealth, when gasoline prices were 92 cents higher than during Christmas of 2008.
However, this past Thanksgiving the state witnessed robust growth in automobile travel, which accounted for approximately 94 percent of total travel.
Motorists in Virginia are already paying $2.88 per gallon, notes AAA Mid-Atlantic and consumers want to know if the spike in gas prices is justified and reasonable right at Christmas.
Crude oil futures have been flirting with $90 a barrel. Until the recent surge in the cost of gasoline, the average price had remained below $2.90 a gallon for 29 weeks in a row.
As a rule of thumb, a $10 increase in the price of a barrel of crude translates into a 24-cent increase in a gallon of gas, and vice versa.
Still, AAA said, the price of crude remains at a two-year high, and U.S. motorists are paying about $1.115 billion each day for gasoline, versus an average cost of about $995 million per day a year earlier in 2009.
In terms of the winter fuel price outlook, the Energy Information Agency projects regular-grade motor gasoline retail prices to average $2.84 per gallon this winter, 19 cents per gallon higher than last winter.
“In some states, gas is up as much as 40 cents a gallon over last year’s prices. Typically, the numbers are up by about 22 cents,” according to market analysts at Oil Price Information Service. “These numbers could curb consumers’ spending and deflate demand and driving, as it did two years ago — when gas prices hit record highs.”
During 2009, the average retail price for unleaded regular was $2.35 per gallon, compared to an average price of $3.25 a gallon during 2008, the highest yearly average on record.
In 2011, higher crude prices are expected to push the annual average price for regular gas to $2.97 a gallon, with diesel fuel increasing to $3.19 a gallon, AAA said.
Gasoline prices peaked at historic highs in the summer of 2008, reaching $4.11 a gallon on July 17. That year, the average price for crude oil was a staggering $99.75 a barrel.