Four dollars and rising.
Soaring oil prices have pushed the
average price of premium gasoline in the Kansas City area past $4 a
gallon for the first time. Other fuel grades, including regular, appear
poised to follow.
Premium fuel stood at $4 or slightly more
Thursday on both the Missouri and Kansas sides of the metropolitan
area, according to AAA. The price for regular gas averaged $3.69 on the
Missouri side and $3.74 on the Kansas side.
But many gas stations
were charging a few cents higher than the average, and some were
selling regular fuel for $3.90. Diesel prices were even higher, with
the average as much as $4.54 a gallon.
Asked when, or if, prices will head lower, industry observers appeared to be at a loss.
“There
seems to be no end to it. But obviously there will be,” said Neil
Gamson, an analyst for the Energy Information Administration.
Crude oil and fuel prices have been on a record run in recent weeks for a variety of reasons.
Worldwide
demand, particularly in rapidly expanding economies such as China and
India, continues to grow faster than supplies. There are ongoing fears
of supply disruptions in politically unstable countries such as Iraq,
Nigeria and Venezuela. Speculators hunting fast money are betting on
higher prices. And a weakening dollar, which is used to value oil
worldwide, also is pushing prices higher.
Much-touted ethanol
blends aren’t offering much relief. The rising price of corn also has
pushed ethanol costs higher. And when the lower energy content of
ethanol is considered, it’s an even worse deal financially than
gasoline.
AAA said the nationwide average energy-adjusted price
of E-85, a blend of 85 percent ethanol and 15 percent gasoline, is
$4.15 a gallon — higher than its pump price.
Rising fuel prices are beginning to affect gasoline consumption.
During
the early 1980s, when oil prices reached about $100 in today’s dollars,
demand declined 8 percent. Although such a dramatic decline has not
happened this time, gas demand this year is down 0.6 percent and is on
track for the first decline since 1991.
David Daniels of Overland
Park said the higher prices have already caused him to make some
adjustments, such as avoiding driving vacations.
“I’m retired and don’t drive much anyway,” he said. “But I do now try to combine as many trips as possible.”
One
bright spot, said the General Motors retiree, is that higher fuel
prices should create a market for electric and fuel-cell vehicles.
Gary
Edwards has a 90-mile round-trip commute and is reducing his speed on
the route by 5 mph. He’s also shopping on the way home instead of
returning to the store later. And he’s more often using the phone and
the Internet to visit with friends and relatives rather than making
trips.
High gas prices also changed his plans for the Memorial
Day holiday. “Not going to the big lake (of the Ozarks) this holiday,”
he said.
As painful as these prices may be for household budgets,
they are not as high as they would be if refiners were booking their
typical profit margins.
Last spring, when tight supplies pushed
gas prices higher, refining profits also soared. Gas prices later
declined after it became clear that supplies were ample enough to meet
demand.
This year it’s different. Refining profits for diesel are
up this year, in part, because of worldwide demand for the fuel. But
refining margins on gasoline are up only slightly, because of lower
demand.
Put simply, soaring oil prices have been the main driver behind the climb in gas prices.
While
it’s possible that refinery margins could still increase on gasoline,
it’s the cost of crude oil that will continue to have the biggest
effect on gas prices.
This month saw a surge in the price of West
Texas Intermediate, the U.S. benchmark, which increased $20 to $132.57
a barrel. On Thursday, about $2 of that was taken back, with a barrel
closing at $130.21. Wholesale gas prices also declined slightly.
While
some within the oil industry contend a correction is overdue, others
say growing worldwide demand for oil will keep prices up. One
prediction by a respected Goldman Sachs analyst already has oil
eventually going to $200 a barrel.
So, is there any good news for consumers? Perhaps.
At
least part of the recent increase is thought to have been fueled by
financial speculators. And some increasingly flustered market-watchers
remain convinced that the fundamentals of supply and demand simply
don’t justify $130 oil.
“Professional petroleum suppliers are
saying, ‘What the hell is going on?’ ” said Lewis Adam, president of
Admo Energy in Kansas City, which helps businesses, including gas
retailers, manage fuel costs.
Adam said there probably is enough
momentum in oil prices to at least briefly push gas prices past $4 in
the Kansas City area. But he has hopes for relief soon after Memorial
Day. He thinks oil prices could decline to about $100 — so instead of
instead of facing $4 gas, it’s possible we would have closer to
$3-a-gallon fuel.
“It could be huge when it happens,” Adam said.
Consumer groups, trucking association want a ‘hot fuel’ fix
It’s warming up, and “hot fuel” is back in the news.
Two
consumer groups and an organization that represents independent truck
drivers said Thursday at a news conference in Washington that with gas
prices at a record high, it’s high time to fix a problem that gives
consumers less energy per gallon because of temperature fluctuations
that change fuel volume.
Consumers “would be even more angry if
they realized they were paying ($3 billion annually) for gas they don’t
get,” said Joan Claybrook, president of Public Citizen.
At recent
prices, hot fuel can cost consumers as much as 10 cents a gallon,
according to estimates generated by the groups. Truckers stand to lose
about $1,200 a year.
Sen. Claire McCaskill of Missouri is pushing
legislation that would require gas retailers to make adjustments in the
volume of a gallon of fuel to account for temperature fluctuations.
Joining
Public Citizen were Consumer Watchdog, based in Santa Monica, Calif.,
and the Owner-Operator Independent Drivers Association, based in Grain
Valley, Mo.
