Waggoner, however, has a different perspective on the price changes at the pump.

Although a change in the price of a barrel of crude oil will be reflected immediately in the wholesale price of a gallon of gas, Waggoner said, it takes about three weeks for that increase or decrease to be reflected at the pump.

Although a change in the price of a barrel of crude oil will be reflected immediately in the wholesale price of a gallon of gas, Waggoner said, it takes about three weeks for that increase or decrease to be reflected at the pump. He said when we see prices go up or down at our local service stations it’s because those owners are reacting to an event that happened several weeks ago.

“So maybe you’re hearing about an event happening today and you’re seeing the prices at the pumps go up today but that didn’t happen because of today’s event,” he said. “These events just happen a lot and usually there’s a three-week lag time before a price change is reflected at the pump.”

While U.S. consumers have only recently been dealing with ever-increasing gasoline prices, our counterparts in Europe, where a gallon of gas is priced somewhere between $8-$9 a gallon, have been doing so for much longer – and they’re still driving.

Additionally, a gallon of gas costs more in Europe because taxes on gas in Europe are much higher than they are in the U.S., Flynn said. “That’s the main differential,” Flynn said. “They have socialized medicine, socialized healthcare and they have to pay for it some way. And one way they’ve paid for it has been in higher gasoline taxes.”

One of the reasons we pay less for a gallon of gas in the U.S. is because we have a lot of refineries here and it’s cheaper for us to produce than it is in Europe, Waggoner said.

Additionally, a gallon of gas costs more in Europe because taxes on gas in Europe are much higher than they are in the U.S., Flynn said. “That’s the main differential,” Flynn said. “They have socialized medicine, socialized healthcare and they have to pay for it some way. And one way they’ve paid for it has been in higher gasoline taxes.”

So far in 2008, Americans have spent about $152 billion on gasoline, more than the $116 billion spent in 2007, even accounting for the $1.2 billion spent on February 29, said Tom Kloza, chief oil analyst at the Oil Price Information Service in Maryland.

Despite dire predictions that the price of a barrel of crude oil could hit $150 or even $200, and the price of gas at the pump could reach $5 or even $7, Kloza said he doesn’t think that’s going to happen. In fact, he said he believes that prices may even go down in late May.

“There are generally two high tides each year for crude oil, and for gasoline,” he said. “The most predictable high tide comes in April and early May; the less reliable second rise comes during hurricane season. Ebb tides can be pretty severe – crude oil might give up 15-20% of value in any given year, which these days would translate into a $17-$24 [barrel] downside move.”

Although he admits that he could be wrong, he still believes that we are within 5% or so of the likely top for U.S. fuel prices in 2008. “Crude oil would need to go to $130 to $135 [a barrel] in order to bring the dreaded $4.00 gallon average into play,” he said.

Flynn agrees. “I’m hopeful we might see the high price for a barrel of oil [top out] at $115 or maybe even $120 or $125 and prices at the pump could go as high as $3.60 a gallon and maybe pull back a little bit,” he said.

Waggoner, though, said he thinks the price of a barrel of crude will go up to $120, or $125 a barrel before June, and wholesale prices could go to $3.20 to $3.40 per gallon by mid summer. That would not bode well for the price we pay at the pump.

“Ultimately prices at the pump are in an uptrend and will continue to go up,” Waggoner said. “The only thing that would slow them down would be a severe recession, unless people really change their driving habits by driving non-gas guzzling cars like the Toyota Prius.

Despite the high prices, Waggoner doesn’t see a day when consumers will ever stop driving. “What is the price where people are going to stop buying oil because they can’t afford it anymore?” he asked. “They’re not going to stop eating and they’re not going to stop consuming gas. What [we] need to do is find an alternative [to gas], but that’s years away.”

Source: Energy Information Administration