Consumers brace for higher gas prices in 2017

H. Levitt Gas Price Story Photo
Cars lined up for unleaded gasoline priced at $2.48 per gallon at Costco at Clybourn and Diversey. Gas at other stations nearby ranged from $2.79 per gallon to more than $3 per gallon.

By Hannah Levitt

Irving Park resident Barbara Cameron uses her car as her primary way of getting around Chicago. The freelance producer fueled her vehicle at a Shell station on the corner of LaSalle St. and North Ave. this week, where regular unleaded gas was $2.989 per gallon.

“It affects everything, we just don’t have as much money,” Cameron said of the price increase. “Between that and insurance, it’s insanity. I don’t know how anyone affords to live.”

The price of gasoline in Chicago eased by 10.4 cents per gallon over the past week, but according to experts the overall trend is up, forcing some tough decisions for consumers in the coming months.

The average retail gas price in Chicago was $2.559 per gallon as of Monday according to the U.S. Energy Information Administration. That’s down from $2.663 per gallon a week ago, but up 54 cents from $2.019 per gallon a year ago.

Average Annual Retail Gas Prices
Experts expect average U.S. gas prices to rise in 2017 for the first time since 2012. (Hannah Levitt/MEDILL)

GasBuddy Senior Petroleum Analyst Patrick DeHaan pointed to the Organization of Petroleum Exporting Countries’ November 2016 decision to cut supply as a driving factor of the gas price increase.

DeHaan expects prices to breach $3 per gallon in 2017 in Chicago, New York, Los Angeles, Seattle and San Francisco. At some Chicago gas stations, prices have already exceeded that.

“Where we see gas prices rising back over that $3 per gallon mark is where consumers will likely be affected the most or they’ll change behavior the most, just for the simple factor that the first digit of the price in gas is a very big bearing on consumer sentiment,” DeHaan said.

Qazi Salman lives in Orland Park, a suburb southwest of Chicago, but drives for Uber downtown and on the North Side. He currently spends $140-$170 per week on gas and expects this amount to increase with gas prices in 2017.

Although Salman does not expect Uber’s compensation to change based on the price increase, the higher prices will not affect Salman’s decision to go on the road.

“This is my full-time gig, so I have to be on the road and I have to be more wise about how I consume fuel,” Salman said.

DeHaan forecasts that the average gas price will rise as much as 50 cents in 2017, the first year-over-year rise since 2012. This will drive a $52.13 billion increase in U.S. gas spending.

“That $52 billion, in anticipation of higher prices, is going to come from somewhere,” DeHaan said of this forecast. “It’s going to mean that consumers with lower incomes are making tough decisions.”

In addition, there is policy uncertainty with incoming President-elect Donald Trump that could alter the gas price forecast, DeHaan said.

Trump said that he believes the U.S. dollar is too strong in an interview with the Wall Street Journal released Monday. Phil Flynn, Senior Market Analyst at The PRICE Futures Group, said that if a weaker dollar persists, it could impact gasoline prices.

“Gasoline prices would start to go up a little bit, but that’s not necessarily a bad thing,” Flynn said of a weaker dollar. “Right now gasoline demand in the United States is near a record high, and when demand is strong the prices go up.”

Photo at top: Cars lined up for unleaded gasoline priced at $2.48 per gallon at Costco at Clybourn and Diversey. Gas at other stations nearby ranged from $2.79 per gallon to more than $3 per gallon. (Staff/MEDILL)