Drivers Expect Steep Road Ahead For Gas Prices

Gas prices at a Shell station last week in San Francisco. i

Gas prices at a Shell station last week in San Francisco. According to a report by AAA, California has the highest gas prices in the continental United States. Justin Sullivan/Getty Images hide caption

itoggle caption Justin Sullivan/Getty Images
Gas prices at a Shell station last week in San Francisco.

Gas prices at a Shell station last week in San Francisco. According to a report by AAA, California has the highest gas prices in the continental United States.

Justin Sullivan/Getty Images

If you've been wondering when gasoline will hit $3 a gallon, wait no more: That's now the average price for regular unleaded in California, and other states aren't far behind. Gas prices have been steadily climbing for the past 50 days.

But this year's pain may be nothing compared with last year.

Sylvia Trillia keeps an eye on prices at the pump. About a year ago, as gas prices were skyrocketing, the San Francisco Bay area teacher decided to park her Jeep Cherokee, with its 20-gallon gas tank.

"Four dollars. Once it reached four I said that's it. I said no, I can't be spending that much," she says. "You know 20 gallons at $4 is $80 right there. And it was more than $4 and so it was $90. And it was just way too much."

So Trillia decided to make a drastic change: She bought herself a moped.

She says it goes fast enough and on one gallon of gas it'll go 50 miles versus 12 or 13 in the Cherokee.

"So it made it a lot cheaper," she says.

When the rainy season came, Trillia put the moped in the garage and started driving the Jeep again. But this week, as the average price of gas in California topped $3, Trillia said she is ready to trade her four wheels for two again. Unfortunately, she needs to get a new battery for the moped.

As it is for Trillia, $3 gasoline seems to be a major tipping point for some motorists.

A 'Psychological Slap In The Face'

Meanwhile, the recent surge in gas prices is blamed on the rising price of crude oil. Jason Taze, an oil analyst at GasBuddy.com, says oil prices are rebounding after crashing last fall.

"Since then we've seen crude oil go back up from $30 a barrel up to about $70 a barrel, and that's the major push behind the rising gas prices right now," he says.

Ben Brockwell, an analyst at Oil Price Information Service, says after months of low demand, oil traders have been bidding up the price of crude oil in anticipation of an economic recovery.

"Supply has been cut to try to match the demand recession," he says. "And when you cut supply and you have people who anticipate demand rising when the economy improves, that's providing in some peoples' mind the equation for higher prices."

But the higher gas prices could undercut an economic recovery, says Edward Leamer, director of UCLA Anderson Forecast.

"The big thing is that it's a psychological slap in the face," he says. "It's telling drivers that they're not as wealthy as they thought they were. We need to feel good about the future again, so the rise in gas prices is a retardant; it tends to contribute to consumer malaise, which has been so important in determining the course of this economic downturn."

Low Expectations For Low Prices

Still, $3 gas is a far cry from June of last year, when the average in California hit $4.61. But that's little comfort to Gerald Creed, a cement contractor filling up his pickup at a San Francisco Shell station.

"Yeah, $3.16 is not good. It's livable. But I don't expect it," says Creed, who says he fills up his truck twice a week. "I expect to see $4."

But many analysts say they don't expect to see gas prices go that high again anytime soon. In the meantime, they say, some drivers already have been desensitized into believing that $3 gas is still a bargain.

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