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Summer gas prices should depend on weather, politics

2007-03-31

By RAYMOND L. SMITH Tribune Chronicle

Tribune Chronicle / Raymond L. Smith

Charles Toda, 62, of Cortland believes gas prices have been manipulated by suppliers to keep them high enough for the companies to maximize their profits but low enough so most Americans will not begin to seriously look for alternatives to their dependence on internal combustion engines that use oil and gasoline.

As they have watched gasoline prices rise nearly 40 cents per gallon since the beginning of the year, Trumbull residents are expressing concern about how high prices will go this summer.

‘‘It is stupid that prices have gotten so high,'' Warren resident Candi Nelson said. ‘‘The more money we have to pay for gas, the less we will have for other things. We can't keep up.''

Masury resident Bill Perkins tries to keep his gasoline costs down by riding his motorcycle every chance he gets.

‘‘If it is not raining, I'm riding my bike,'' he said.

A gallon of gas cost more than $3 in late August 2005 after fierce hurricanes shut Gulf of Mexico oil drilling rigs and refineries.

While industry experts do not expect gasoline prices to cross the $3 per gallon barrier this year, they believe it will rise as high as $2.75 per gallon. Local prices hovered around $2.66 for a gallon of regular gasoline Friday.

Tom Kloza, one of the founders of the 25-year-old Oil Price Information Service, said prices shouldn't surpass about $2.75, barring some catastrophe at refineries, a weather disaster or Middle East supply disruption.

‘‘By mid-spring, most of the refineries that so far have struggled with winter maintenance or event problems should be back in action,'' he said. ‘‘I would not be surprised to see motorists pay more for their fuel on Easter Sunday than they will pay on Memorial Day weekend.''

During the first weeks of January, gasoline prices averaged just under $2.11 per gallon in Niles, according to the AAA Fuel Gauge survey.

Nationally, AAA said the average for self-serve regular gasoline is now nearly $2.60 per gallon. Last month, the national average was about $2.34 per gallon.

Numerous wild cards remain. The National Oceanic & Atmospheric Administration predicts that the 2007 hurricane season will not have as many hurricanes battering the U.S. shorelines, but the storms that will occur will be powerful.

Kloza said gas prices will increase by 10 cents to 25 cents above the $2.75 area only if there is an early and active hurricane season or some major geopolitical activity occurs.

‘‘Without hurricane landfalls, gasoline prices should drop substantially in the last 100 days of 2007,'' Kloza said.

In December and the first two weeks of January, crude oil prices dropped from above the $60 per barrel area to about $51 per barrel. However, since mid-January, crude oil prices increased above $62 per barrel this week, pushing up gasoline prices.

‘‘The gasoline market has tightened in recent weeks,'' Doug MacIntyre, senior oil market analyst with the U.S. Energy Information Systems, said. ‘‘Prices are increasing because demand is up.''

Other factors pushing prices upwards include a number of U.S. refineries having to shut down or slow operations due to scheduled maintenance and unanticipated problems.

Political problems created by Iran capturing 15 British sailors and marines last week have not affected the production and shipments of oll from the region. However, energy buyers become concern anytime they believe something will affect the amount and cost of oil coming to the U.S.

‘‘Anytime there is an increased risk in future oil, prices tend to be driven up,'' MacIntyer said. ‘‘They do not want to wait until after something happens. So, the companies purchasing oil will begin buying it early, pushing up its costs.

Demand for gasoline has been increasing every year since 1994 when the U.S. used about 7.6 million barrels per day. In 2006 , the U.S. used about 9.24 million barrels a day. It is projected the U.S. will use about 9.46 barrels a day in 2008.

As a result of the 2005 hurricane season and the volatile nature of the oil and gas markets, communities, such as Warren, have adjusted their budgets to account for the volatility of the gasoline market.

‘‘We've adjusted our budget by increasing the amount of money we have available for gasoline and oil for our vehicles,'' city Auditor David Griffing said. ‘‘Because we buy our gasoline through the state purchasing system, we do not pay as much as the typical driver going to the gas station, but we experience the ups and downs that every consumer experiences.''

Warren has about 250 vehicles. In 2006, it spent $469,459 on gasoline, representing about 6 percent of the city's total budget. In 2005, the city spent $364,760 on gasoline, or about 5 percent of its total budget.

‘‘The amount we spend on gasoline is not a large part of the city's total budget, but we try to keep costs down by telling our employees, among other things, to reduce the amount of time they have engines idling.''



rsmith@tribune-chronicle.com

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Hardcore_Pyro (2007-04-01)
It is re-damn-diculous that we have to setle for being gouged at the station.

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