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Oil Prices Sharply Higher - American Consumers Looking for Alternatives

American Government Special Collections Reference Desk

Oil Prices Sharply Higher - American Consumers Looking for Alternatives

Mil Arcega
April 18, 2006

Crude oil futures hit $70 a barrel for the first time in seven-and-a-half months Monday, pushed higher by concerns over declining gasoline stocks in the United States, supply disruptions in Nigeria and tension over Iran's nuclear program.

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In the U.S., average prices for regular unleaded gas have gone up 11 cents per liter in two months. And with the government predicting higher prices this summer, it could mean changes in the way Americans live and drive.

The average price for unleaded regular gas hit 67 cents per liter on Monday. And the U.S. Energy Department predicts prices will go higher this summer, up to 25 percent higher than last year's record -- setting prices in the U.S. after Hurricane Katrina reduced refining capacity.

Tom Kloza is with the Oil Price Information Service. "We'll probably peak on gasoline very close to $3.00 (75 cents a liter) national with some states above that."

It's already close to that level in some states. Gary McIlroy of Austin, Texas says he used to spend $50 to $65 dollars a week on gas. But now that he is paying $125 dollars a week, and more, he says it's going to have a serious impact on his family's travel plans.

"Particularly with summer coming along, we've began discussing whether we would take a road trip or not to the Texas coast. And if gas prices reach three dollars a gallon, we probably won't do that."

And Americans, who have grown dependent on a regular supply of cheap, foreign oil, are angry.

Motorist June Harris says, “I think gas prices are ridiculous, completely ridiculous.”

Another motorist, James Peterson, remarks, "Basically, I think they just gouge it."

Sarah Anderson, at the Institute for Policy Studies in Washington, DC, has analyzed executive benefits and salaries at the top oil companies.

She believes some of the anger over oil profits is justified, especially after revelations that the outgoing chairman of Exxon, Lee Raymond, received a retirement package worth nearly $400 million dollars.

"I think it'll spark a lot of outrage. Clearly much of his high level pay is due to the high price of gas."

But some analysts say most American consumers aren't ready for that. Some are turning to hybrid cars that run on gas and electricity, others are buying so-called "green cars" which use alternative fuels.

Green Eye Auto Sales in Oregon, reports a brisk business in the green cars. Clark Tippin says his company converts the cars to run on a mixture of vegetable oil and methanol. "You have a fuel that's usable and very minimally dependent on petroleum fuel."

Some marketers are taking advantage of that dependency by targeting motorists who are trying to stretch their gas dollars.

Joni Lubovitz, at the Federal Trade Commission, warns people to be wary of fuel additives and gadgets that claim to boost fuel efficiency by as much as 30 percent. "Those kinds of claims, we have yet to find any kind of device or additive that can produce that type of result."

But there are things motorists can do that will produce results. According to the government, getting your engine tuned up can cut your gas bill by about 4 cents a liter. Replacing a dirty air filter can save up to 7 cents and filling tires to the proper air pressure can improve fuel efficiency by up to 2 cents a liter.

Gary McIlroy says that's not enough. "I sent a letter to the White House saying we can't take this anymore. If prices continue to go up and our paychecks are staying the same, people need some help. This needs to stop."

There may be some relief this fall. The Energy Department says fuel prices could be lower by September when U.S. refineries damaged by Hurricane Katrina go back into production.

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