Image From ..thecarconnection.com
Last week my colleague, Patrick DeHaan, warned that gas prices are "ready for lift off." He noted that the nation's unemployment rate of 8.6% reflects positive economic growth and that, in turn, translates into increased demand and consumption of gasoline and oil.
While the national average price of gasoline ($3.29) is still declining, it's highly uncertain whether we will continue to see the steady incremental price decline that we saw in November through the remainder of 2011. Instead, prices could soon start going up. While the downturn of retail gasoline prices was long overdue, --let's remember-- the national average price of gas is still 35 cents more per gallon than we paid last year on this date.
History tells us we should expect trouble ahead. Why? Because for the past seven years the average price movement from the national average “floor” on Dec. 31 to the “peak” price posted in the next 12 months has averaged $0.93 cents per gallon.
Last year was actually a good snapshot of what we’ve seen for the past seven. 2010 ended with the national average at $3.05 and we saw the annual spring 2011 climb push the national average .91 cents higher to its peak level as early as May 11 when it reached $3.96 per gallon.
In three of the last seven years, the spread between the ‘floor’ price and the peak exceeded $1 per gallon and only once in the past seven years was the spread below .82 cents per gallon. And, while we typically anticipate “peak” prices to occur in the midst of the summer driving season, in two of the last three years the peak has occurred in October and December.
While past performance is no indication of future prices, if the national average doesn’t move closer toward $3 per gallon by the year’s end, when prices “spring ahead” next year many of us may be paying $4 or more… Possibly, a lot more.