DRIVING UP PRICES

Retail gas costs near summer highs

STAFF/WIRE REPORT

Retail gas prices are spiking to levels last seen in the heat of summer driving season, raising fears that consumers could cut back on holiday spending.

But the crude rally propelling the jump at the pump hit the brakes Monday, as a barrel of oil tumbled more than 2 percent and the dollar strengthened after hitting a 14-month low.

The average price for a gallon of regular gasoline rose for the 13th straight day, adding sixth-tenths of a cent overnight to $2.671, according to auto club AAA, Wright Express and Oil Price Information Service.

That’s still below what drivers were paying at this time last year, but the 20-cent, two-week jump could prompt consumers already dealing with a climbing unemployment rate, depreciating home prices and damaged 401(k) accounts to spend less over the holidays, said Ryan Sweet, a senior economist with Moody’s Economy.com.

“If they’re spending more money at the pump, they’re going to be less willing to go out to the malls to spend frivolously,” Sweet said.

The average price for regular gasoline Monday in the Mahoning Valley was $2.633, an increase of less than 1 cent from the day before. The price was up from $2.392 a month earlier.

The Energy Information Administration in its weekly update released Monday put the national average for unleaded regular at $2.674 per gallon, a 10-cent jump from the previous week, marking the fourth straight increase.

Gas prices hit their summer peak of $2.6925 on June 21, but drivers could soon be paying more than that if prices continue inching upward. With fewer motorists on the road after summer’s end, drivers typically get a break on prices this time of year.

“Until consumers are confident in their jobs and future income, they’re going to be very hesitant in spending,” Sweet said. “And higher gas prices are just another excuse to keep money in the pocket.”

The Federal Highway Administration reported that travel on all U.S. roads and streets in August rose by 0.7 percent, or 1.9 billion vehicle-miles, from August 2008 to 259 billion vehicle-miles. The data is based on preliminary reports from state highway agencies.

Crude prices, which rose to $82 last week, fluctuated Monday as the dollar hit a fresh 14-month low against the euro before strengthening. Because commodities are priced in dollars, a drop in the U.S. currency makes them cheaper to international investors.

Benchmark crude for December delivery fell $1.82 to settle at $78.68 a barrel on the New York Mercantile Exchange.

PFGBest analyst Phil Flynn said weakness in the U.S. dollar has driven the price of oil far beyond the realities of what normal supply and demand fundamentals typically bear.

“The increase was driven not so much by demand but by declining gas production and a weakening dollar,” Flynn said in his morning report. “Things are out of whack as refiners have scaled back production to historic lows as their margins get squeezed.”