News / USA

Americans Take Oil Price Rise in Stride, Brace for Higher Prices

Gasoline prices are displayed on a pump at a filling station on the Palisades Interstate Parkway in Orangeburg, New York, March 7, 2011
Gasoline prices are displayed on a pump at a filling station on the Palisades Interstate Parkway in Orangeburg, New York, March 7, 2011

Multimedia

Greg Flakus

Turmoil in the Middle East and North Africa in the past few months has driven the price of oil on the world market to more than $100 a barrel, causing a spike in fuel prices in the United States that is putting a crimp in transportation budgets for families and businesses alike. For the moment anyway, people are taking it in stride.

Filling up at the gasoline pump has become much more expensive in recent weeks as the sharp rise in crude oil prices comes down to the ordinary consumer.

Most people, including this woman, are not happy about it. “I am a college student and I have to drive 45 minutes to college, so it [is terrible].”

Many people are making adjustments, driving less or using cars with better fuel economy if they have that option. Richard, who owns a gas-guzzling truck, said he may start leaving it at home more often.

“I do work a ways from where I live, so I will have to drive the other car. We have a smaller car, a Ford Fusion, and that gets good gas mileage.”

Most U.S. drivers are reacting calmly to the rise in fuel prices, partly because prices have not yet gone as high as they were in 2008, when oil went to more than $147 a barrel.

Even a larger spike in prices would probably not have much impact on U.S. fuel consumption, according to Mahmoud El-Gamal, chairman of the Economics Department at Rice University. “It would take a long time of very high prices for people to change their lifestyles and for cities to be structured around those new lifestyles.”

The problem is that most U.S. cities, like Houston, are spread out over a large area and people commute to work or school from distant suburbs. El-Gamal said changing the infrastructure and the attitudes of people who choose to live far from their place of work is difficult and costly.

“We are seeing some urbanization trends, where the sub-urbanization that we observed over the last few decades is being reversed, but it is being reversed very, very slowly.”

The most immediate cause of the rise in oil prices is unrest in Libya and other Middle East oil-producing nations.

El-Gamal said any disruption, anywhere, affects the price of oil worldwide. “The United States does not actually import much oil from the Middle East; most of our oil would be from Canada, but still, because it is a global market, total supply and total demand will determine prices.”

What worries El-Gamal is not so much the unrest in Libya, but the strife in Bahrain, which sits near the major shipping routes out of the oil-rich Persian Gulf. “Disruption of oil flow out of the Persian Gulf could be catastrophic, then you would be talking $300 a barrel, not 120.”

Although states like Texas still produce oil, domestic production is far short of demand and the United States imports two thirds of the petroleum it uses.

That means prices at the pump here reflect such things as weakness in the dollar, which is used in international oil pricing, and growing demand for oil in China and India. Turmoil in the Middle East has the most dramatic impact, though, so that even the slightest hint of a supply disruption from the world's richest oil region can cause prices at U.S. gasoline pumps to rise quickly.

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