Dreading the Gas Station? Get Used To It

March 2, 2008 12:00:00 AM PST
Ninety-eight dollars, $99, $100? The price per barrel of oil has made headlines every time it's gone up another dollar, causing many to think it couldn't possibly go any higher.But with the price topping $103 per barrel Friday, drivers won't be getting relief anytime soon.

In San Mateo, Calif., $4 a gallon has become less of a shock and more of a reality.

"I'll drive farther and use more gas to not pay over $4 for gas," said one motorist.

This latest spike seemed to come as a surprise to President Bush. Responding to the idea of $4 gasoline in a press conference last week, he said, "That's interesting, I hadn't heard that."

This reaction is no surprise in itself, said Democrats in Congress.

"The administration has been out of touch with ordinary customers at the pump for eight years," said Rep. Edward Markey, D-Mass.

But the rising gas prices are not reminiscent of the reliable supply-and-demand model. If it were, the United States might not be facing such a pinch right now. So what exactly is going on?

First, the U.S. dollar is sinking in value. So oil, which is traded in dollars, becomes a cheap and attractive option for foreign investors, which drives prices up for Americans.

Investors also are moving their money out of the faltering stock market and into oil and other commodities. Those prices are spiking, too.

Want proof? Natural gas is up 26 percent, coal is up 56 percent and wheat is up 32 percent.

"It has to do with the money," says Tim Harrigan, a commodities trader for Alaron. "It's the money that's coming into the markets that they've never seen before."

And with barrels more expensive than $100 becoming the norm, gas prices are likely going to go even higher by the summer, when there typically is a stronger demand.


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