Motorists got a barrelful of bad news Wednesday when oil prices soared to a new high, gasoline set another record in California and the Department of Energy warned that pump prices could remain above $2 a gallon through much of next year.
The latest round of woe was spurred by a spate of refinery problems in the U.S., increasing instability in the Middle East and a growing imbalance between demand for petroleum, which is rising rapidly, and production capacity, which isn't.
After briefly touching $65 a barrel, the U.S. benchmark crude closed at a record $64.90, up $1.83, or almost 3% on the New York Mercantile Exchange. That was up 46% from a year ago and boded ill for motorists already paying sky-high prices for gasoline -- which also hit a new national record Wednesday.
"It is scary. We are in limbo," said Yolanda Chacon, a Lancaster resident who paid $51.97 to fill her minivan Wednesday afternoon at an Arco station in Echo Park. "It feels like it's going on and on and on," said Chacon, who sometimes gases up twice a day while ferrying her husband and daughter to and from their jobs in Los Angeles and Santa Clarita.
"I'm really spreading it thin," she said.
Nationally, pump prices rose an average of 2.2 cents a gallon to $2.376 on Wednesday, according to AAA -- 27% above a year ago. In Southern California, where gasoline prices typically run well above the national norm, a gallon of regular hit a record $2.676 on Wednesday, up almost 13 cents from a month ago and 26% higher than the year-ago price of $2.120. Diesel fuel prices also set new records in California and around the country.
The latest jump in crude prices -- which have climbed 14% in the last three weeks -- killed a Wednesday morning rally on Wall Street as investors fretted that high energy prices could throttle the U.S. economy.
Economists, however, noted that oil would need to rise to more than $85 a barrel to top the inflation-adjusted peak hit in 1980. That, and the fact that the United States uses fuel more efficiently today, helps explain why the economy has been able to absorb the surge in energy costs.
"We as a nation are not as oil dependant as we were back then," said Christopher Thornberg, senior economist at the UCLA Anderson Forecast.
Consumers in Europe and Japan have been paying close to $4 a gallon for gasoline for years, he added. "To some extent, people are going to have to suck it up and realize this is a new reality."
