Hope you've enjoyed relatively low gas prices while they lasted. Like they do each spring, gas prices are rising again. However, this year they are going up higher and sooner than the past few years. In fact, just last week the national average price of a gallon of gas rose 17 cents to $3.50 a gallon. This was the highest price ever for this early in February.
What's causing these high oil and gas prices? First, the economy is improving. That makes investors bet that more people will be demanding gas and oil. To take advantage of future profits, they bid up oil and gas futures. In addition, companies that need oil and gas also try to lock in stable prices for the future, hoping to keep their costs low.
Third, some refineries are shutting down for maintenance in advance of the summer uptick in demand, while others have closed permanently. There's a bit of a supply shortage in California, so some fuel is being diverted. As a result, some analysts are saying that oil prices could beat their all-time high of $145 a barrel in 2008. (Source: CNBC, Consumers Taking Hit From Rising Fuel Prices, February 4, 2013)
It wouldn't be so bad if wages also went up to compensate for higher gas prices. This is what's known as a living wage -- the amount needed to pay for basic necessities such as food, housing and transportation. Actually, that's what the minimum wage is supposed to do, but doesn't.
In fact, the U.S. minimum wage is only $7.25 an hour, lower than in Europe and many other countries. Since increases in the national minimum wage have to be approved by a budget-conscious Congress, it just hasn't kept up with the cost of living.
How It Affects You
Gas prices usually follow high oil prices by about six weeks. Once gas prices go up, you can count on high food prices, about another six weeks later. Although there isn't much you can do to control high gas prices, you can at least find out How You Can Predict Tomorrow's Gas Prices Today.
- What Are Futures Contracts?
- Your Opinion -- What Can We Do About High Gas Prices?
- Watch the Video -- What Is Supply and Demand?