Rachel Grossman on Monday, 28 February 2011 18:56

Gas Prices Rapidly on the Rise

The standard summer gas price increase may come even sooner than expected, with gas prices expected to top $4 a gallon, possibly within a  few weeks.  Earlier this month, California’s average price for a gallon of regular gasoline hit $3.50 for the first time since 2008.  The rising gas prices are attributed to the impact of Middle Eastern turmoil on the oil market. 

The uprising in Libya triggered the record-setting prices in California last week, fueled by crude oil touching the benchmark of $100 per barrel for the first time since 2008.  Per Susanne Garfield of the California Energy Commission, the immediate concern is that the upheaval in Libya will lead to oil shortages in Europe, "sparking fears of a cascading supply shortage since Europe will be looking elsewhere to sate their needs."

But the nightmare scenario is if instability infects oil titans Saudi Arabia and Iran, said Jason Toews, co-founder of Minnesota-based GasBuddy.com, an Internet site that tracks gasoline prices. Then $4 a gallon will seem a bargain.

"If you have problems in Saudi Arabia or Iran, that could send crude oil prices north of $200," Toews said. "In that case, the Bay Area for sure would hit $5 to $6 a gallon. I don't see $7 a gallon for the Bay Area. But $6 isn't crazy."

Analysts hope the oil shocks can remain contained. But they also warn that any significant spread of the instability in the Middle East could propel crude oil and gasoline prices into uncharted waters.