All eyes were directed toward Chicago on February 15, when President Obama returned to his hometown, and his old neighborhood, to draw the nation’s focus on the terror of guns and the tragic breakdown of the social order. The President chose Chicago for two very unfortunate reasons: 1) the January 29 murder of Haidya Pendleton (the First Lady attended the funeral), and 2) Chicago’s current reign as “murder capital of the world” (see: www.examiner.com/article/cook-county-to-tax-sin-and-death ; http://www.eaminer.com/article/chicago-s-tragic-struggle-1).
However, the President’s visit was not the only news highlighting the Chicago area! As all those who live or work in the Chicago area know very well, the price of gasoline here has skyrocketed in the past few weeks. In fact, the catapulting of gasoline prices upward has been worse in Chicago than anywhere else in the nation. As an example, my experience on Friday is not at all uncommon. At Noon I drove by one station posting a per gallon price of $3.69. I returned from the opposite direction just a few hours later to fill up, only to discover that the price had been jacked up to $3.95. Such is the current plight of Chicago drivers!
Statistics from the “AAA” gas price report reveal that, one month ago, the average Chicago land price was just $3.42! That is a far cry from the current Chicago average price of $3.93 and state-wide price of $3.79.
Meanwhile, although the country as a whole has also been hit by higher prices, the rate of change has not been nearly as high. One month ago, the national average stood at $3.30/gallon, and one week ago was $3.53. Standing currently at $3.60, the national average is over 9% lower than in Chicago.
Because of these trends, Chicago holds the unenviable distinction of “first in the country on gas price hikes”! Not surprisingly, the President neglected to mention that fact while in Chicago. Why draw attention to economic hardship when things are already difficult enough?
Why have gasoline prices spiked? A look at normal seasonal trends would lead one to expect gas spikes to occur in the spring (around Memorial Day)) and in the late summer (Labor Day) due to high levels of motorist miles, as well as emissions regulations (which require gas distributed in Chicago to conform to standards that make it the most expensive in the country). The simple fact is that folks don't drive as much in the dead of winter, so supply/demand dynamics usually result in lower prices.
Alas, this winter is “different” for one incontestable reason: the price of oil has zoomed up over 14% since December – supposedly due to market optimism about future demand because we have passed through the November election and the much ballyhooed “Fiscal Cliff” without disaster striking.
There is another “culprit” behind the gasoline hike – a “culprit” specific to the Midwest and the Chicago area. The primary oil refinery serving the Chicago area is in Whiting, Indiana, and that refinery is in the midst of a major overhaul – curtailing production. In light of that overhaul, scheduled to occur during this period of lower demand, a fire at a big refinery in Northwest Ohio only served to severely compound the ill effects of the Whiting overhaul.
The good news is that the refinery fire caused only a temporary shutdown. However, no one can predict with confidence when price relief might come for beleaguered Chicago motorists. Demonstrating the “Catch 22” of economics, one factor that could lower prices is a spike higher in unemployment or a move lower in GDP data. Consequently, it might be best if we all just “grimace and bear it”. After all, gas prices are out of our control. The only thing we do control is how much we drive.