Gasoline hits record $4 a gallon in US
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A man pumps fuels into his truck at a gas station in Half Moon Bay, California. AP |
US gasoline rose to $4 a gallon at the pump for the first time, threatening to further shake the confidence of consumers whose spending makes up two-thirds of the economy.
The average price of regular gasoline reached a record $4.005 a gallon, up 28 percent from $3.119 a year earlier, AAA, the nation's largest motoring club said. Gasoline futures traded at $3.521 a gallon in New York yesterday after reaching a record $3.565 on Friday.
"The fact that confidence has gone down as inflation expectations are going up indicates gasoline has been an important driver because it's one of the reasons expectations are rising," Nigel Gault, chief US economist at Global Insight Inc in Lexington, Massachusetts, said.
Consumers are already rattled by falling home values and a weakening job market, prompting them to curb spending and threatening to halt the six-year expansion. Consumer confidence in May fell to a 28-year low, as inflation expectations rose to their highest in more than two decades, according to last month's Reuters/University of Michigan sentiment survey.
"There has never been a price like this," industry analyst Trilby Lundberg said. "Gasoline demand growth has been flat, now it is turning negative and price is the reason."
Lundberg's survey of 7,000 filling stations nationwide found gasoline climbed 20 cents on June 6 from three weeks earlier to $3.99 a gallon.
Gault estimates that every sustained 20-cent gain in the price of gas shaves 0.3 percentage point off consumer spending growth.
Gasoline prices have risen as inventories dropped more than 11 percent since March 7 to 209.1 million barrels, the Energy Department said June 4.
Crude oil for July delivery rose $10.75, or 8.4 percent, to settle at $138.54 a barrel June 6 on the New York Mercantile Exchange. The increase was the biggest gain in dollar terms ever and the largest on a percentage basis since June 1996. The cost of crude oil determines about 73 percent of the pump price of gasoline, according to the Energy Department.
Oil futures traded at $137.80 a barrel in New York yesterday.
Record gasoline prices are causing consumers to cut back on fuel purchases. US gasoline demand fell 4.7 percent from a year earlier during the Memorial Day holiday week, a sign motorists are cutting consumption because of record prices, MasterCard Inc, the second-biggest credit-card company, said June 3 in its SpendingPulse report.
Gasoline demand compared with a year earlier has dropped in 16 of the past 19 reports from MasterCard. Demand typically climbs going into the summer months.
Record gasoline costs and lower home values caused consumer confidence in the US economy to fall to the lowest level in nearly three decades. The Reuters/University of Michigan final index of consumer sentiment for May dropped to 59.8, compared with an average reading of 85.6 in 2007. It was the lowest level since June 1980.
Agencies
(China Daily 06/10/2008 page17)
