Wednesday, May 16, 2007

Gas Prices Continue to Increase; Hit Record High

From This Week in Petroleum:

For the third consecutive week, gasoline prices were up, increasing 4.9 cents to 310.3 cents per gallon as of May 14, 2007. Prices are 15.6 cents per gallon higher than this time last year and have now reached an all-time nominal high. All regions reported price increases. East Coast prices were up 2.3 cents to 298.1 cents per gallon. In the Midwest, prices jumped 9.8 cents to 317.2 cents per gallon, while prices for the Gulf Coast rose 4.5 cents to 291.5 cents per gallon. The largest increase was in the Rocky Mountains, where prices increased 10.3 cents to 319.3 cents per gallon. West Coast prices were up 0.5 cent to 337.8 cents per gallon. The average price for regular grade in California was down 1.1 cents to 345.0 cents per gallon, but remains 12.0 cents per gallon above last year's price.

The good news is inventories have turned the corner -- or at least they have stopped dropping like a stone:

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However, here is a chart of prices. Notice they are higher than the same time last year.

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There are two issues here.

1.) We are at the beginning of the summer driving season. Will prices continue to increase throughout the summer?

2.) What will be the impact on consumer spending? We saw a terrible retail month in April. Wal-Mart posted their worst decline in 28 years. I have to think high gas prices were partially responsible. If prices continue to increase, will we continue to see a drop in consumer spending?