'There's not much we can do' as gas prices climb
www.courier-tribune.com By J.D. Walker Staff Writer, The Courier-Tribune
ASHEBORO - Ugh! It's gasoline sticker shock!
Consumers are taking notice of the upward creep of gasoline prices.
"All of our customers have been complaining but they understand there's not much we can do about it," said Odell Graham, manager of Servco at 509 W. Dixie Drive in Asheboro.
The U.S. Department of Energy reports the U.S. average retail price for regular gasoline rose for the eighth week in a row last week, increasing by 5.4 cents per gallon as of Feb. 3 to end at 152.7 cents per gallon, the highest price since Sept. 17, 2001.
"We've had to go up on our prices about every other day as the wholesalers increase their prices to us," said Graham.
Donna Frazier, manager of the Randleman Phillips 66 station, said every effort is made by her company to hold down price increases to just once a week.
"But we did have to change our prices today (Friday)," she said.
Increasing by a total of 16.7 cents per gallon over the last eight weeks, the average retail price is 41.1 cents per gallon higher than last year. Prices throughout the country were up, with the largest increase occurring in the Midwest, where prices rose 6.5 cents to end at 152.4 cents per gallon, according to DOE reports. The smallest price increase occurred on the West Coast, where prices rose 4.0 cents.
The last time consumers saw prices this high was in the second quarter of 2001, just prior to the Sept. 11 terrorist attack, based on DOE statistics. Shortly after 9/11, prices plummeted, in part due to the slump in the airline industry.
So, why the increase this time?
Blame the cold weather. Blame the oil industry in Venezuela. And to a degree, blame the unstable situation in the Middle East.
January and February are traditionally times for the oil industry to conduct routine maintenance on equipment and to begin conversion from heating oil production to more gasoline production. The goal is to stockpile supplies in time for the summer driving season.
This year, the National Oceanic and Atmospheric Administration (NOAA) reports Old Man Winter has held a long, strong grip on the eastern half of the U.S. In particular, this winter has been 9 percent colder than average in New York and Pennsylvania; 6 percent colder in New England states; 8 percent colder in South Atlantic states and 8 percent colder in Tennessee, Alabama, Mississippi and Kentucky.
Odell Routh, owner of Routh Oil in Climax, supplies heating oil to many residents in the county.
"We've got people on fixed incomes and we feel real sorry for them but what can you do?" he asked.
Higher demand in January, continuing into February, has led to record draws on heating oil reserves, say DOE experts. It also puts pressure on suppliers to continue producing heating oil and put less emphasis on gasoline.
Adding to the problems caused by higher demand for heating oil is the unrest in Venezuela. Since December, nationwide strikes against the country's president, Hugo Chavez, have halted oil production throughout the country.
Venezuela is the world's fifth-largest oil exporter and supplies 14 percent of the crude oil used by the United States. Mid-western states in the U.S. get fully 40 percent of their crude oil from Venezuela, say DOE analysts.
It only took a couple of weeks for the effects of losing access to Venezuela's daily 2.7 million barrels to hit the United States. Since then, gasoline prices have inched up as much as 5 percent each week.
Government reports indicate the strike against the government is close to resolution but the oil strike continues with no clear end in sight.
In the meantime, the oil markets have begun to show pre-war jitters, said Larry Goldstein from the Petroleum Industry Research Foundation in New York. Gasoline prices are not only showing the effects of Venezuela, but also what is called a war premium in which investors boost oil prices because of uncertainty of future supplies.
"Two conditions are necessary to have a war premium - war must be inevitable and imminent," Goldstein said. After President Bush's State of the Union speech and Secretary of State Colin Powell's presentation to the United Nations Security Council, he said both factors are present.
"Up until now, you didn't have both those conditions," he said. "But you certainly have them now."
Don't expect any short-term relief, say DOE experts.
"World oil markets will likely remain tight through most of 2003, as petroleum inventories and global spare production capacity continue to dwindle amid blasts of cold weather and constrained output from Venezuela."
If that leaves consumers fuming at the pumps and wondering what they can do, maybe the advice of one former gasoline station manager will do the trick.
"I see all these folks driving those SUVs and I'm over here in my little Civic thinking, 'Ha! Ha!'" he said. "My advice to everyone is buy cheap and drive less."