2009 Spring Car Guide
Gas prices up or down this summer?

"People are just not driving out to make sales calls like they used to, they aren't driving a rental car when they are doing business in another city and they aren't taking the big F-150 pickup to a construction job site. A great deal of the gasoline that is burned in the course of the day is used by business, and that's what we're missing right now," Sundstrom says.

One of the most important factors impacting gas and oil prices is the connection between energy demand and overall economic activity, says Sara Banaszak, senior economist at the American Petroleum Institute, or API. "When an economy is growing, it is using and consuming more and more energy and it is creating an increased demand for energy resources. Similarly, when an economy experiences an economic decline, such as the one we are experiencing right now, you see energy consumption fall. This current, global economic downturn is the biggest, albeit temporary, factor why we've seen this tremendous drop in terms of energy prices."

Regional price differentials

Although there are parts of the country where gasoline prices seem to have spiked noticeably in recent days, Sundstrom sees this as part of the normal pattern associated with the start of the summer driving season. Most of the price increases are due to the introduction of summer blends of gasoline, many of which have to be reformulated for particular metropolitan areas to meet certain specific clean-air standards, he says. "This is not exactly something new, it is part of the traditional, seasonal pattern that we've all come to know and have experienced."

The Memorial Day holiday weekend generally is considered the unofficial start of the summer driving season, and gasoline prices traditionally rise in anticipation of increased demand. This summer, in addition, the AAA foresees about a 1.5 percent increase in the number of Americans traveling by car.

"I don't think we'll be in a situation this year in which we'll see gasoline prices exploding like they did last summer," says Phil Flynn, an energy analyst for Chicago-based Alaron Trading Corporation. "But I do think that we're going to see gasoline prices rise a bit more than the EIA has perhaps envisioned -- not too much more, but definitely a bit higher -- because I believe ... oil prices might reach $70 a barrel. Prices should peak sometime around the Fourth of July before, ultimately, pulling back later in the summer."

Flynn also has concerns that the various grades of so-called "boutique blends" have the potential to create situations of short-term gas price spikes in parts of the country where such specific reformulated gasoline must be sold because of existing Environmental Protection Agency mandates.


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