Gas prices surge as economy shows growth
Gas prices soared last week on signs of economic health. The annual transition to summer-blend gasoline also contributed to the largest one-week increase in average US gas prices since February 2011.
Samir Shabo fills up his tank at a Mobil gas station in Chicago. Gas prices are climbing as rising economic growth boosts oil prices.
Nam Y. Huh/AP/File
Gas prices soared 18 cents to $3.54 since last week, making it the largest one-week increase in average US gas prices since February 2011, according to the US Energy Information Administration.
The jump isn't entirely unexpected. Prices tend to rise during the switch from winter-blend gas to the more expensive summer-blend gas. Refineries temporarily slow production to sell off the winter blend gas and undergo maintenance during the transition. That raises wholesale prices, and, in turn, the prices at the pump.
Anticipating those rising costs, investors pour money into oil and gas futures, betting on higher price outcomes.
"It’s almost a certainty that whatever the price is on Groundhog Day, the price on St. Patrick's Day is going to be significantly higher," said Tom Kloza, chief oil analyst at the Oil Price Information Service.
Signs of a stabilizing economy aren't helping gas prices either. Steady job growth and a healthy housing market have contributed to a 10 percent increase in oil prices over the past two months. OPEC production slipped to a 15-month low in late January, putting even more upward pressure on prices. [Editor's note: This sentence was modified to clarify the price impact of reduced supply.]
The hardest hit consumers are in the Midwest, where gas prices increased 22 cents to $3.51 per gallon since last week. Californians are also feeling the pain, with gas prices topping $4 in Los Angeles.
The added burden comes as many are struggling with the end of the payroll-tax holiday, which expired on Jan. 1, 2013. For a family making $50,000, it means $1,000 less in the pocketbook each year.
Gas prices are still below last year's average of $3.62 a gallon, and Kloza said North America's shale oil boom will keep them below last year's peak of $3.94.
"The overall trend should be higher," Kloza said, "but I still don’t necessarily think it’s a strong case for prices to exceed the national highs seen last year and the year before."