Rising gasoline prices not high enough to reduce summer consumption, economist says
Summer 2006 will be an expensive one for motorists. In the past six weeks, gasoline prices have jumped 15 percent. However, a University of North Texas economist says that the prices have not jumped to levels high enough to reduce consumption.
Dr. Terry Clower, associate director of UNT's Center for Economic Development and Research, says that as Memorial Day, and the start of the prime summer driving season, approaches, gasoline costing $3 a gallon "seems more and more likely."
"But we have not gotten to a point where prices should force consumers to substantially change their behaviors," he says. "We love to moan and groan about gas prices, but notmany of us are doing anything about it. The market has not hit a price level that willinfluence consumption."
The American Automobile Association agrees that the higher prices will not impact the summer travel season.
Clower blames the current series of price hikes on drops in gasoline inventory, noting that each year, refineries undergo seasonal changeovers, from making winter blends to summer blends of gasoline.
"We remain vulnerable to these price hikes because there has been no significant development of new refineries in the U.S. in 20 years," he says.
He adds that varying gasoline formulation rules add to the supply problem. California, Texas, and states in the Midwest and other areas of the country require differing levels of additives, such as ethanol, which are used to help gasoline burn cleaner. Rumors of an ethanol shortage have raised concerns among some in the energy industry.
Clower adds that political unrest, "especially regarding Iran and the insurgency in Iraq," is also causing oil prices to rise, "which will also be reflected in this summer's gasoline prices."
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