George S. May Business Blog

Gas Prices Raised Again for Seemingly No Good Reason

American dependence on foreign oil seems to have largely manifested itself as a political problem, a complicated situation involving many of the world’s most powerful nations which could result in higher prices at any moment. Oil companies and politicians try and explain away every increase in oil prices regardless of supply or demand.

This year, experts are at least forthcoming in saying that there doesn’t need to be a reason to charge more money in order for these companies to do so, they just have to want to make the extra money, which I believe will not come as a problem to them.

“There is no legitimate fundamental reason for higher prices, but it is March 1st, so we have to expect to see them,” Peter Beutel of Cameron Hanover said Monday in a report. “Reasons have a way of materializing at this time of year.”

Wholesale prices for the April gasoline contract on the New York Mercantile Exchange are about 10 to 12 cents higher than the March contract that expired Friday. Much of the rise is due to refiners switching to more expensive summer blends of gasoline designed to meet tougher pollution standards. The higher prices should make their way to the pump over the next few weeks.

These rises in price aren’t merely an annoyance or the sapping of a few extra dollars, rather it is a huge problem that is getting bigger for both consumers as well as small business owners who are trying to stay profitable in these tough times, and finding that their shipping, transport, utility, and food costs are all going to start climbing through the summer.

Climbing oil prices also are a big factor in higher gasoline price. Crude prices are more than twice what they were a year ago when the U.S. was mired in the Great Recession. Investors look for global demand to pick up as the economy improves, especially in China and other developing countries.

However there are those who see this move as toxic to a fledgling economy still reeling from several turbulent quarters and a recession. These higher costs encourage companies to spend less on expansion, which inevitably leads to a well-expanded bottom line for oil firms who are still unclear as to why everyone seems to think economic times are hard.

Gasoline prices were flat overnight, rising 0.1 cents Monday to a national average of $2.705 per gallon, according to auto club AAA, Wright Express and Oil Price Information Service.

The gas market is edging forward, reaching record highs each time the price moves upward. Currently gas prices are about 78 cents higher than they were just a year ago. This instability is a factor that ironically is easier for individuals to grapple with than small businesses.

Small businesses are usually hardest hit by spikes in operating costs, because they usually don’t have large margins for price variances which fluctuates most costs of doing business.

If the health of American small business is an indicator of economic health, we might want to skip the physical, because it will likely reveal bad news.

Oil prices stayed around $80 a barrel Monday on the NYMEX. Benchmark crude for April delivery rose 17 cents to $79.83 a barrel on the New York Mercantile Exchange. Earlier in the session, prices peaked at $80.62. On Friday, the contract added $1.49 to settle at $79.66.

In other Nymex trading in April contracts, heating oil rose 1.25 cents to $2.0478 a gallon, and gasoline gained 0.32 cent at $2.1911 a gallon. Natural gas prices fell 5.3 cents to $4.760 per 1,000 cubic feet.

In London, Brent crude was up 31 cents at $77.90 on the ICE futures exchange. So the cost increases are passed down to the consumer and some of the world’s most profitable corporations continue double digit profit increases (still down from those happier days in which some could expect triple digit gains, I wonder how they manage?).

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