Why prices are rising
Fuel prices began their ascent in mid-March when Russia’s invasion of Ukraine sent panic to global oil markets.
Shortage fears stemming from the conflict have pushed the cost of a single barrel to around $120, the highest amount in nearly a decade. According to the Energy Information Administration, crude oil prices are the main contributor to regular gas prices.
Meanwhile, travel demand has rebounded from pandemic lows, and that rebound has outpaced attempts by oil producers to boost supply.
The Colorado Department of Transportation and Denver International Airport both reported near pre-pandemic passenger numbers on roads and planes during the recent Memorial Day holiday, signaling the start of a busy summer.
“Americans can travel more freely again than they have in the past two years and they are kind of benefiting from it,” said Skyler McKinley, spokesperson for AAA Colorado. “Now they have to make other economic choices, like eating less in restaurants so they can travel.”
The imbalance between fuel supply and demand has created the worst-case scenario for budget-conscious drivers, McKinley said.
“We’re talking notable money now for most people,” McKinley said. “What remains to be seen is to what extent higher prices will dampen demand to the extent that prices stabilize or even fall.”
Some observers have also pointed the finger at oil companies for artificially inflating prices to satisfy investors, even as the price of crude oil has fluctuated. Democratic Representative Diana DeGette and other members of the House Energy and Commerce Committee questioned oil executives during a contentious hearing on the issue in April.
Executives denied any wrongdoing and blamed market forces for most of the increases.
“I want to be absolutely clear: we don’t control the market price of crude oil or natural gas, or refined products like gasoline and diesel fuel,” said Michael Wirth, CEO of Chevron, during the hearing.
“We have zero tolerance for price gouging,” he said.
Some turn to public transit, other transportation options
As prices began to rise this spring, Camilla Cluett began looking for alternatives to the daily car trips through Denver.
She first tried to go out of her way to fill up at cheaper stations like Costco, but that trip took an extra 20 minutes, consuming crucial fuel and time. She now tries to take an RTD train to work at Meow Wolf in the Sunnyside neighborhood at least three times a week.
“It’s very convenient,” she says. “But if I work the last shift, I still have to drive because the train doesn’t run late enough.”
Transit ridership in the Denver area has seen a slight increase in ridership in recent months, but remains below pre-pandemic levels. Residents of the metropolitan area took 4.8 million bus or train trips in March, a 42% jump from the same period in 2021, according to the latest ridership figures from RTD.
However, it’s difficult to directly link higher ridership to higher gas prices, said Christina Zazueta, the agency’s community engagement manager.
“There are so many factors affecting ridership that it’s hard to come up with a direct correlation,” Zazueta said. “It’s more complicated than gas prices. Factors affecting response include seasonality, weather, service levels and new line openings, for example.
There is probably a relationship, she added. When gas prices soared in 2008, ridership also surged.
“But it wasn’t as dramatic as you might expect,” she said. “The idea that gas prices and ridership are closely related was abandoned in 2014, when gas prices fell, but ridership remained about the same.”
Sales of electric and plug-in hybrid cars in Colorado are also seeing a steady increase, signaling that buyers have a stronger appetite for electric vehicles.
These types of cars accounted for 8.6% of new vehicle registrations in the first quarter of 2022, up from 5.6% the year before, according to the Colorado Automobile Dealers Association.
Yet new electric vehicles remain too expensive for many buyers. Supply in the new vehicle market also remains tight due to chip shortages and delivery delays.
Cluett said she had thought about looking into electric vehicle options, but her budget ultimately won’t allow it this year, she said.
“I’m not in a financial position to buy a new car,” she said. “And if I had the disposable income, I would want to do a lot of research first, so I’m kind of stuck.”
Is relief in sight?
The short answer is probably no, given the high demand for travel.
Prices in Colorado typically spike around Memorial Day and then gradually increase through Labor Day, McKinley said.
“The prices we are paying right now are very close to the summer low,” he said. “Now is a great time to start thinking strategically about how to save if you are worried knowing that there are still very high prices ahead of us.”
It’s still too early to tell how high things might go, he noted. Factors like a busy hurricane season in the Gulf of Mexico could rattle oil markets and push prices up faster.
“It could affect refining and how we transport gas across the country,” McKinley said. “That’s kind of a scary open-ended question right now.”
The rise has yet to have a huge impact on consumer spending in Colorado. Retail sales remained relatively stable despite rising gasoline prices.
Personal savings is another story. After saving record sums during the pandemic, many workers have begun to reduce their monthly contributions to their piggy banks. The amount of money the average American saved each month fell to 4.4% of their income in April, according to the Bureau of Economic Analysis.
That’s down from a high of 8.7% last December.
“That seems to be really where people are being hit the hardest right now,” said Brian Lewandowski, an economist at CU Boulder’s Leeds School of Business.
Juan Carillo, a beverage delivery driver who lives in Wheat Ridge, said he likes to fill his F-150 truck’s tank when it’s half to ¾ full.
On a recent afternoon, the strategy kept its bill at an acceptable price of $23. He doesn’t know if it will save him money in the long run, but it keeps him sane and allows him to eat out once or twice a week, he said.
“There are times when I drive too much and feel like I’m spending $60 a day just to live,” he said.