UCLA Report Doesn’t Record Rising Gas Price Impact Yet

0

Gasoline prices are not as high as they seem. Really.


For all the concern about the economic impact of $3-a-gallon gas, prices are a relative bargain compared with the early 1980s, according to the UCLA Anderson Forecast’s latest report.


Senior economist Christopher Thornberg wrote that, adjusted for inflation, a motorist buying 600 gallons of gasoline a year now spends roughly 6 percent of his or her income on fueling up the car. Back in the 1980s, the same amount of gas would have cost 8 percent to 9 percent of total income and that’s without today’s more fuel-efficient vehicles.


Of the current spike in prices, Thornberg said in the UCLA report: “It’s too early to think this will have an impact on the economy.”


More important, he noted, is how long prices remain high. “Oil shock prices began to rise sharply in mid-1979 and didn’t fall back to their earlier level for almost five years,” he wrote. “In this particular case, domestic gasoline production is quickly getting back on line.”


Nationally, gasoline prices began increasing a bit last week in response to concerns over production interruptions from Hurricane Rita. The average price for a gallon of regular was about 5 cents higher after the storm.


That increase came after two weeks of declines, some very sharp. In Los Angeles, the average price was $2.93 for the week ended Sept. 26, down four cents from the like period two weeks earlier, according to the Energy Information Administration. That compared with Boston, which saw a 26-cent drop.


The reason for such variances is that California relies on its own refineries for much of its gasoline while Eastern and Midwest cities are more reliant on production from the Gulf states.


Prices are likely to remain high for another two or three weeks, when demand softens and refineries damaged by the two storms go back on line.


But don’t expect gasoline prices to drop back down too far, Thornberg warns, noting that the strong worldwide demand for oil that has influenced most of the price increases in recent years is unlikely to slacken anytime soon.

No posts to display