Many Americans look back to the days when gas prices were well under two dollars with fondness.
Some people were old enough to drive during those times. They can remember being able to afford to just cruise afford on a regular basis and just enjoy driving around while listening to some music.
Others are too young and can only remember seeing the prices at the gas stations barely ever getting remotely close to two dollars per gallon.
And then there are the youngest Americans who won’t even have memories of low gas prices and might never know a world where a huge chunk of their paychecks do not go to paying for gas.
The tough news is that it’s only getting worse.
This past week saw the price of gasoline rise 17 cent per gallon.
Saturday alone, the price for regular gasoline climbed 4.6 cents to $3.33 on the national level. Americans have not seen prices this high since October of 2008, when the economy plummeted. The six-cent increase on Friday was the most for one day since 2008 as well.
This can be attributed to the rising oil prices.
Crude oil prices increase by nine percent last week. They peaked at $103 per barrel, also the highest since October of 2008.
It is expected that because of the rises in oil prices, gas prices will also rise by 37 cents per gallon in the next few weeks.
Chris Lafakis of Moody’s Analytics says that on average, for every rise in oil cost by one dollar, gas prices rise by about 2.5 cents per gallon.
Furthermore, for every one-dollar increase in the cost of oil, Americans have to spend another one billion dollars every year.
The increase of the cost of oil can be traced to the uprisings in the Middle East and North Africa. The majority of the world’s oil is purchased from the region.
The economy of the United States has been working its way back up to stability for the last two years.
The rise in the cost of oil and gas can severely hurt the resurgence of the economy in long term.
It is interesting to see what will happen in the next few weeks. Will Americans drive less and thus lower the demand for oil? Or will we simply deal with the increase and work towards cutting back costs in other ways?
With the constantly changing middle eastern landscape (Egypt, Libya, etc.), the Fed and the government must be vigilant to prevent rising fuel prices from effecting the housing recovery and the health of the economy.