Indiana Report: More Pain at the Pump
Gas prices will likely continue to rise as summer approaches, according to a new report from Ball State University, Muncie, Ind.
Center for Business and Economic Research Director Mike Hicks says inflation, regulation and unrest in the Middle East are driving up prices. He says a continuing increase in gas prices would also likely slow job creation and Indiana’s economic growth.
How much more consumers will pay for a gallon of gasoline in the coming months and the subsequent harm to the economy may depend on a variety of factors, including demand, regulation and unrest in the Middle East, says the report.
“Gasoline Prices: An Update,” a report by Ball State’s Center for Business and Economic Research, (CBER), finds that the current increases in petroleum prices – ranging from $3.80 to $4 across Indiana – possess permanent, seasonal and transient elements.
Rising gas prices this winter suggest that the coming year may be eerily similar to 2011, when rise of gas prices through the second and third quarters of 2011 contributed to a slowing economy last summer, said Hicks.
In early 2011, CBER released a study that estimated an increase in the price of gasoline from $3 to $4 per gallon would cause Indiana’s economy to grow at a rate that was 1.2 percent smaller and would lead to about 60,000 fewer jobs being created.
“The effect on the state’s economy will largely be dependent on the persistence and the level of the price increase,” Hicks said. “However, it is clear that the new events can combine to push prices to record levels by early summer 2012.”
The study reviews historical trends in gasoline prices and compares them with current events affecting today’s fuel costs:
- Worldwide daily consumption of petroleum is at 85 million barrels a day. Demand for oil should increase as the world economy continues to recover.
- During 1991-2011, the average price of gasoline rose 12.6 percent from February to May as many refineries shut down for brief periods in order to make summer-driving mixtures.
- During the last 30 years, conflicts in the Middle East have sent oil prices surging due to fear that supplies could have been cut or significantly reduced.