The Sacramento Bee (California)
The elections are over, and so is the nation’s gas holiday. Whether the two are connected depends on one’s perspective.
After plunging about $1 a gallon since late spring, gasoline prices have stabilized and are edging back up. Industry consultant David Hackett said gas will continue to rise for the foreseeable future, although motorists will be spared huge increases.
Industry analysts say the uptick is largely the result of higher crude oil prices, which have firmed up lately in part because some members of OPEC are talking about limiting supplies.
Hackett said California prices also are being influenced by some refinery production problems in the Los Angeles area, although they’re not believed to be severe.
Then, of course, there’s an alternative theory behind the latest fluctuations: politics.
Some 42 percent of Americans believe the Bush administration somehow drove gas prices down to help Republicans in the elections, according to a Gallup Poll last month. Democrats were far more likely to believe the theory than Republicans, the poll said.
“There was a political motive to keep gasoline prices low,” said Jamie Court, president of the Foundation for Taxpayer and Consumer Rights in Santa Monica. “Now that the election’s over, we’re going to see prices going up. … Oil companies are going to go back to artificially shorting the market.”
Californians paid an average of $2.43 a gallon Thursday for self-serve regular, up 2 cents from the day before, according to AAA. That was 95 cents cheaper than the $3.38 record set May 18.
The Sacramento average increased 2 cents to $2.34 a gallon, 93 cents below the mid-May peak of $3.27.
Filling up at the Shell station at Bradshaw and Old Placerville roads east of Sacramento on Thursday, motorist Tom Franklin wasn’t ready to embrace the political theory. But he wouldn’t rule it out, either.
“I wouldn’t put it past ’em,” the Natomas resident said as he filled his Honda Accord with $2.40-a-gallon regular.
Industry officials dismissed the theory. They say gas prices rose last spring because crude prices shot up, and those costs were driven by tensions over Iran’s nuclear program. Some refiners in the eastern United States also were struggling to convert their facilities from the fuel additive MTBE to ethanol, causing additional upward pressure.
Hackett said prices then fell because of the self-correcting power of market forces. When the price hit a statewide record $3.38 in May, a “crush of huge volumes of imports” knocked the price down, he said.
In addition, refiners around the country worked feverishly to avoid a repeat of the post-Katrina supply shortage of 2005, said Joe Sparano of the Western States Petroleum Association, a Sacramento trade and lobbying group.
“There was a lot of inventory that went into tankage in expectation that there might be hurricanes,” he said.
When the hurricane season fizzled, the nation was left with a surplus of gas and oil, resulting in a steep plunge in price, Sparano said. Prices appear to be stabilizing now that the excess has been largely used up, he said.
That affects what consumers pay. “Have retail prices… bottomed out for now? The answer is probably yes,” said Hackett, who heads Stillwater Associates consulting in Irvine. “(But) I don’t see any big price spike.”
Tom Kloza, director of editorial content at the Oil Price Information Service, agreed that a major surge in price is unlikely.
“This is not the next march” to $3 a gallon, he said in an e-mail from his office in New Jersey.
Behind the latest uptick is a rebound in the price of crude oil, which crested at more than $77 a barrel over the summer and then fell to around $58.
Now crude is moving back up. Analysts cited the onset of winter, which brings demands for heating oil, along with recent threats by some OPEC oil ministers to scale back production. The price rose $1.33 Thursday to $61.16 on the New York Mercantile Exchange, with traders pointing to uncertainty over the Democrats winning control of Congress.
The high prices earlier this year generated a combined $31.6 billion in third-quarter profits for five of the world’s largest oil companies: ExxonMobil, Chevron, ConocoPhillips, BP and Royal Dutch Shell.
All of which had motorists grumbling at the Bradshaw Road Shell station.
“Somebody’s lining their pockets with the money,” said Stephanie Hoadley as she filled up her Volkswagen Beetle. “Just another thing to be let down about.”