by Alex Tekip, staff reporter
ST JOHNS- The future is difficult to predict, but the price of gas might be even harder.
An ever-changing economy and a hard-to-control oil industry have contributed to the unstable gas prices in the United States during recent years, affecting Americans everywhere, including those who live in and around St. Johns.
Fowler resident Erika Bancroft fills up at the St. Johns Speedway station on 103 S. Scott Rd.
Bancroft, a mother of two, said she had to trade in her family-friendly GMC Envoy for a Chevy Impala because of gas prices and fuel efficiency.
“Because I work in East Lansing, I actually have switched to a car versus my envoy, which I love my envoy, but the gas is killing me,” she said. “To fill up [the Envoy] was $80-$90 and to fill up [the Impala] today was only $51, so I had to change cars and I can’t carpool because I work overtime, so I had to switch to a car. And you know, I have kids, and so it’s struggling just to budget the money and everything.”
According to the U.S. Department of Labor Statistics, there was a 10.1 percent increase in the price of gas between January and February of 2013.
Lisa Cook, Associate Professor of Economics and International Relations at Michigan State University, said there are a few main factors that result in the unstable gas prices seen today.
“Gasoline prices fluctuate for a number of different reasons and some of them have to do with production capacity, and some other reasons have to do with geopolitical events,” she said.
Cook, who spent the 2011-12 school year in Washington, D.C serving on President Barack Obama’s Council of Economic Advisers, said a prime example of the gas prices issue as it pertains to production capacity would be the gasoline shortage due to refineries affected by Hurricane Katrina.
She also said that the high level of influence that geopolitical events have on gas prices is a unique economic attribute.
“If anything happens in Iran, if anything happens in Iraq, or in Egypt, or in Somalia, lets say if there is a tanker that is overtaken by Somali pirates in Saudi Arabia, I mean, you know, the price of oil could go through the roof,” she said. “So we’re particularly sensitive to that, any policy maker would be sensitive to that. I think that in that sense it’s just really special.”
However, Cook said the biggest factor currently contributing to the changing gas prices is of the macroeconomic variety.
“When investors believe that the economy is picking up, they believe that gas prices are going to go up,” she said. “Why is that? Because typically, in the investor’s mind, he or she thinks that the supply of petroleum is fixed and therefore, its harder to ramp up this production capacity, so prices are going to go up if economic growth is [predicted] to pick up.”
Bancroft said the current economic state of gas prices and the market as a whole have impacted her 17-year-old daughter when it comes to driving.
“She’s having a hard time finding a job and trying to find a job within this area is difficult, so we don’t want her to drive too far away because then it would cost her a lot in gas,” she said.
Cook said she actively participates in ways to decrease her own fuel consumption, and therefore costs.
“I live about an hour away [from MSU],” she said. “When I, I start seeing higher gasoline prices I try to do a couple things. I try to carpool more, um, I try to ride my bicycle more, if we have weather that’s conducive for riding my bicycle. And you know, drive less just like the next person.”
Cook said the economic substitution and price effects contribute to her conscious awareness of high gas prices, as well as the effect of fuel usage on the environment.
“I also, you know, consciously do these things,” she said. “I am a person who would promote conservation… all the time.”
St. Johns resident Marc Hufnagel said he is not bothered by the instability of gas prices, although he would not be objected to paying less for fuel.
“I remember gas prices at 32 cents a gallon when I was in high school,” he said. “so…the recent changes, you know, 20, 30, 40 percent swings don’t bother me.”
Hufnagel said he makes a daily 168-mile round-trip commute to and from his job in Auburn Hills in his Chrysler Crossfire, which gets 32 miles per gallon.
He said he has been able to successfully accommodate swinging gas prices into his budget, and has not brought up the subject much to others.
“I haven’t really talked about the subject too much,” he said. “Most people that I deal [with], I mean, they live right in town, they don’t go very far anyway.”
However, Cook said gas prices have been a hot topic of conversation for many years now.
“I hear people complaining about gasoline prices all the time. And I think that that might be somewhat unusual,” she said. “That’s one thing, but the other thing is, I think its just a point of conversation, it affects so many people and so many people drive here; I here about it all the time.”
Bancroft said gas prices “irk her a little,” and its very unfortunate that $3.56 (the price of gas at the time of the interview) is considered to be a “good” gas price.
“I think the oil companies are still making money hand –over- fist and the price…can still be lowered and I think they’ll still make money hand- over –fist,” she said.
Cook said that Bancroft’s reaction is a common one.
“There are certain tax credits that oil companies get… I think that many Americans have said that ‘this is not fair, that they’re so profitable, they shouldn’t be making all this money, especially in times of scarcity,’” she said.
Cook said Congress has taken action in attempting to minimize profits of oil companies.
“Every so often Congress tries to implement a win-fall profits tax, ” she said. “When the price of gasoline goes up, gasoline companies, oil companies have these big, unanticipated profits, or win-fall profits, and they start debating bills that would cap these win-fall profits. It never works because this is just a knee-jerk reaction…”
Cook also said she believes gasoline and oil are economic commodities that need to be treated with caution.
“It affects so many people and it affects so much of the economy,” she said. “This is something that we have to watch very carefully…I think I would be safe in saying this, there’s no other commodity like this.”
Bancroft said she has seen gas prices affect people personally at her former job.
“I used to be a debt collector at a credit union, and [gas prices have] affected people a lot, because they go ‘do I pay bills or do I pay for gas so I can get to work to afford to eat?’ she said. “And that is a struggle people have everyday.”