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Gas prices on the rise again
Cost could pass $4 for 1st time since 2008
0202gas
Joey Libasci fills up his work van at the QT on West Ridge Road on Wednesday morning. Gas prices are rising, with some experts predicting $4.50 per gallon of gas this summer.

Like any other business owner, Joey Libasci cringes at the thought of increasing gas prices.

As prices at the pump have crept up by nearly 30 cents in the past month, Libasci Contracting's profits have taken a substantial hit. Those prices have increased by 52 cents from this time a year ago.

"I have to use what I have to use to do my job," Libasci said.

Rather than paying the nearly $50 per tank he is accustomed to, Libasci is now paying up to $80. And the $600 each month on fuel expenses he normally spends are rising.

Prices in Gainesville on Wednesday ranged from as low as $3.41 to as high as $3.46.

Those prices are the highest on record for this time of year.

By Memorial Day, many fuel experts expect prices to find their way over $4 per gallon, bringing back memories of 2008 when drivers began exploring ways to save at the pump.

Patrick DeHaan, senior petroleum analyst for GasBuddy.com, said gas prices could peak as high as $4.60 by Memorial Day.

"I do expect prices to hit over $4 in Atlanta," DeHaan said. "It's only February and prices really start to aggressively move higher ... in April and May."

Jessica Brady, a spokeswoman for AAA, said she also projects prices in the $4 range.

"If prices begin to escalate — as refineries shut down more, demand starts to pick up in the summertime — we could see prices surpass $4 again," Brady said. "I don't quite know if they will hit $4.50 ... but it is likely we could see prices peak above $4 a gallon."

The reason for the price increase, DeHaan said, is due to supply issues because refineries are switching from winter to summer gasoline. That means refineries start with very little supply, but must begin producing mass quantities.

"Thanks to government regulations, I think that's a reason why prices go up every spring," DeHaan said.

But prices have also been rising since the new year, possibly due to Iran's threat to close the Strait of Hormuz. That threat led to a fearful reaction among suppliers, both Brady and DeHaan said.

Many refineries have also closed in the Northeast and in Texas in recent months. Those closings have caused a drop in gas production, while demand continues to rise. The current oil output is about 8.5 million barrels per day, the lowest since February 2010. That compares to a demand of about 8.1 million barrels per day.

For many drivers, those increased prices will require a change in driving habits.

But for Libasci there's not much that can be done. He can't drive less, and he can't charge more.

"Now it takes me more money in gasoline to do my job, which cuts my profits, my living expenses down," Libasci said. "If you charge more you will price yourself right out of a job. So we're kind of in a ‘damned if you do, damned if you don't' situation."

Other drivers, though, will begin to carpool and drive less.

"Once prices get to a certain level people start consolidating errands — they cut back on other things in order to compensate and afford prices," Brady said.

Some may even look to purchase a more fuel efficient vehicle.

That's exactly what Ryan Orear of Dahlonega plans to do.

"I'm in the market for a new car, so I will probably end up buying a new car that gets better gas mileage," he said.

When drivers make decisions like Orear to purchase a more fuel efficient vehicle, the market experiences demand destruction. That occurs when people make permanent lifestyle changes and the market demand will be forever changed.

There will also be temporary changes, DeHaan said.

"We will see people get their bicycle out ... but when prices go back down they will get right back in their car," he said.

When prices do peak in the coming months many families will be strained financially, but fuel experts assure the prices will not remain above $4.

But they also don't expect the same occurrence as 2008 when prices reached $4 per gallon but then fell below $2.

"It will come back down," DeHaan. "I don't see significantly ... unless there's an economic fallout."

 

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