Energy Prices on the Rise

 

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By Thursday Review staff

Industry analysts had expected it and right on cue it arrived: higher energy prices across the board. The extreme chilly weather during the past six weeks created an unprecedented demand for home heating oil and placed one of the greatest demands for electric and gas heat the country has ever faced. And winter is not even over, yet.

Much transportation activity across North America slowed to crawl: closed highways, roads, bridges and rails; limited air travel with thousands of flight cancellations each week; school closures and workplace slowdowns; and millions of Americans choosing not to use their cars or trucks, sometimes for days at a stretch. That created a dramatic drop-off in demand for aviation and diesel fuel, and an even bigger drop in demand for gas at the pump.

The average price for a gallon of gas actually dropped five cents during January.

But according to AAA, that too will change. A longer-than-average period of winter and post-winter maintenance for refineries means a reduced supply. Furthermore, over-the-road shipping must now catch up after many weeks of inactivity, meaning more trucks and more rail activity than normal. Add to that the traditional increase in demand for gasoline which accompanies the arrival of spring, and gas at the pump will almost certainly begin to rise.

The cost of home heating may have the biggest impact nationwide as homeowners and consumers face some of the biggest energy bills they have ever seen. Some economists worry that to pay for those higher-than-average home heating bills, many consumers will be forced to rein-in spending on other items. This could slow the recovery and bring on a brief mini-recession as Americans face an increase in both home energy costs and gasoline.

But not all economists are in agreement. Many point to the slow but steady improvement in the job numbers as evidence that the economy is making its way back—stubbornly perhaps—to a full recovery.

Related Thursday Review articles:

Polar Vortex Economy: Losers, Winners; Thursday Review; February 2, 2014. – See more at: http://www.thursdayreview.com/EnergyPriceRise.html#sthash.oiHWvosL.dpuf

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