Current Gas Prices, Gas prices are off to a fast start in 2012. The national average for a gallon of regular gasoline is up more than 8 percent since the end of 2011, rising from $3.25 per gallon to $3.52, according to new data released by the U.S. Energy Information Administration.
While gas prices tend to rise through the first half of the year, this is the earliest the average price per gallon has breached the $3.50 mark. If this pace continues, the national average should hit $4 a gallon by May, if not sooner. The last time the average price did so in the U.S. was summer 2008, when the price of oil hit $140 a barrel. Last year gas prices approached $4, hitting an average of $3.98 in April, before falling.
Higher gas prices could pose a serious threat to the fledgling economic recovery, which has shown signs of strength recently. Typically, $4 a gallon tends to be the point at which the price of gas starts to eat into economic growth.
“Anytime the economy spends 4 to 5 percent of GDP on oil, then you’re getting close to stall speed,” says Jason Stevens, an equity*n*lyst at Morningstar. “We saw this last year when Libya and Japan blew up, and prices went through the roof. Demand pulled back a bit, but growth certainly slowed.”
Strangely, the current run-up in prices comes despite sinking demand in the U.S. “Petrol demand is as low as it’s been since April 1997,” says Tom Kloza, chief oil*n*lyst for the Oil Price Information Service. “People are properly puzzled by the fact that we’re using less gas than we have in years, yet we’re paying more.”
Kloza believes much of the increase is due to speculative money that’s flowed into gasoline futures contracts since the beginning of the year, mostly from hedge funds and large money managers. “We’ve seen about $11 billion of speculative money come in on the long side of gas futures,” he says. “Each of the last three weeks we’ve seen a record net long position being taken.”