Ah, Thanksgiving, a time for visiting family, leaves rustling underfoot, afternoon football...and high gasoline prices. How did that happen? Gas prices are supposed to be lower in the fall due to lower gasoline use after the spike from summer vacations and driving season. But that isn't the case this year.
Americans have seen a nearly 20 percent spike in oil prices and a 10 percent jump in gasoline prices in just the past several weeks. These higher than normal gas prices could very well persist and even rise, meaning that families may continue to spend a greater portion of their income on gasoline than they originally anticipated this holiday season.
According to the Energy Information Administration's latest data, the average price of regular unleaded gasoline is $3.111 per gallon, up from the average price for November 2006 of $2.315 in inflation-adjusted terms--a 34.3 percent increase. Gas prices are currently just $0.077 shy of the 2007 monthly high set in May, which itself was the highest average in inflation-adjusted terms since June of 1981. The economic squeeze from gas prices means many Americans will have less to be thankful for this year.
The higher prices will make those long Thanksgiving trips in the car noticeably more expensive this year. A family driving to Des Moines, IA to Chicago this Thanksgiving could expect to spend $90.48 round-trip.[i] That same trip would have cost $67.33 in 2006 and just $40.28 in 2001 in inflation adjusted terms.
Since President Bush's first Thanksgiving in 2001, oil prices have almost quintupled and gasoline prices have more than doubled in inflation-adjusted terms. Since November 2001, when a gallon of gas cost just $1.385 in inflation-adjusted terms, gas prices have risen by 124.6 percent. According to the Energy Information Administration's latest data, crude oil currently stands at $94.02 per barrel, a remarkable 394.8 percent increase over the November 2001 price of $19.00 in inflation adjusted terms.
This year, families will have to spend a larger share of their incomes to get to their Thanksgiving dinners. This can affect family budgets, especially since volatile gas prices do not necessarily align with income growth. In fact, according to data released by the Bureau of Labor Statistics, median usual weekly earnings for full-time workers in inflation-adjusted terms have declined by 1.3 percent since the fourth quarter of 2006. Further, they have declined by 2.4 percent since the fourth quarter of 2001. More money spent on gasoline means less for turkey, stuffing, pumpkin pie, and daily necessities as well.
There are many reasons for high oil and gasoline prices. Instability in Iran and the Middle East, higher demand from China and India, and speculators' activities can all drive up oil prices. Limited U.S. refining capacity and lack of big oil company investments in additional refining capacity and clean alternative fuels contribute to high gas prices.
Americans have seen a nearly 20 percent spike in oil prices and a 10 percent jump in gasoline prices in just the past several weeks. Another important element is the high U.S. demand for gasoline. From January 2001 to October 2007, U.S. gasoline demand grew by 13 percent. As with most commodities, higher demand pushes prices up. Unfortunately, the Bush administration has done next to nothing to reduce gasoline demand. And even its meager loophole-ridden increase in fuel economy for light trucks was overturned by the 9th Circuit U.S. Court of Appeals because it was "arbitrary and capricious" and did not take into account fuel consumption reductions necessary to slow global warming. In addition to its own inertia, the administration even refused to approve states' efforts to establish a motor vehicle emissions standard for greenhouse gas pollution that would have increased fuel economy and reduced demand.
Congress has an opportunity to reduce gasoline demand and costs by finalizing the energy bill when it returns from its Thanksgiving recess on December 3. The final bill should include the Senate provision to increase car and light truck fuel economy to an average of 35 miles per gallon by 2020. This provision would reduce oil use by 1.2 million barrels per day--about the amount the United States currently imports from Nigeria and Kuwait. And it would save families at least $25 billion annually in 2020.
High gasoline prices threaten to be the Grinch that steals Thanksgiving 2007. On that day we can hope that by next year Congress passes and President Bush signs more efficient fuel economy standards so that Thanksgiving 2008 can still end with a big slice of pumpkin pie.
[i] Average fuel efficiencies of a passenger car = 22.9 mpg (Source: Federal Highway Administration, Highway Statistics 2005, Table VM-1 Annual Vehicle Distance Traveled in Miles and Related Dada - 2005 by Highway Category and Vehicle Type, [U.S. Department of Transportation November 2006]