Neighborhood Inscope

Will Rising Gasoline Prices Be The Nail That Pops The Denver Real Estate Bubble?

By Dr Denver H. Bubble

Mon Apr 01 2019

Early spring and summer are usually a season of rising prices for gasoline. However, this season has been very unusual. Gasoline prices have increased almost 43% from January to March, the biggest quarterly increase since 2012 and prices are closing in on the $2.98 per gallon at the national level reached in May 2018, which was the priciest level since October 2014. Drivers now pay $2.71 for a gallon on as a national average and average about $2.43 in Denver, up 28 cents from a month ago and nearly 50 cents higher since early January, according to GasBuddy.

Gasoline prices usually climb this time of year as refiners change their production to produce more expensive, summer-grade fuel. Pump prices have also been boosted by a rapidly rebounding oil market and disruptions at some key refineries, in the Midwest.

There are also two other factors at play, the flooding in the Midwest and the unrest in Venezuela. The flooding in the Midwest is disrupting the flow of ethanol which is a large compound of modern gasoline blends. Also, the Trump Administration has sanctioned the Venezuela oil exports due to the political crisis which is occurring in the country since the start of the year. Gulf Coast refineries specialize in processing Venezuela’s heavy crude in gasoline, leaving them scrambling to find alternative sources.

The seasonal changes, shortages of ethanol due to Midwest flooding and the crisis in Venezuela may push Denver’s gas prices above $3.00 per gallon this summer. Higher gas prices in 2008 were one of the reasons cited as causing the previous housing bubble to burst as the increase in gasoline-related payments caused people to fall behind on their mortgages setting off waves of defaults in Denver and across the country. Will we see a repeat this summer due to higher gas prices?