Are Gas Prices Too Pumped? As gas prices skyrocket, consumers and politicians wonder who’s to blame.
www.thecarconnection.com by Bengt Halvorson 2/25/2003
Have you noticed the buzz? People are talking, with sudden urgency, about how quickly gasoline prices have risen in the past few weeks, wondering what’s going to happen when military action in the Middle East. Politicians are questioning the honesty of the industry. And yes, some of those behind the wheel of gas-guzzling SUVs are probably reconsidering whether they’re willing to dig deep into their wallets to fund the daily commute.
The media — and those familiar with the industry — are blaming a combination of factors, including a prolonged rise in the price of crude oil, the potential war in the Middle East, the unstable political situation in Venezuela (a significant supplier to the U.S.) and the corresponding petroleum-industry strike, terrorism scares, several recent refinery incidents, and an unusually rough season of winter storms that have snagged normal transportation systems.
But there have also been rampant accusations of price gouging at the pump. Nearly two weeks ago, the American Automobile Association’s Washington, D.C., office issued a release that essentially “…reminded the petroleum companies that there is a law regarding profiteering during national emergencies,” according to an AAA official. Thus far, there have been no emergencies declared, but the statement served as a reminder that there are many organizations monitoring the industry for misbehavior.
Then last week, an outraged Senator Charles Schumer (D.-N.Y.), spoke out to Capitol Hill about skyrocketing gas prices and accused the industry of “…trying to make a quick buck” from consumers’ uncertainty over the situation in the Middle East. Schumer called for a Federal Trade Commission investigation into the price situation.
Crude oil pricing
Consumers and politicians are anxious to pin the blame on a particular group, but there is no single clear culprit. A petroleum industry observer opined that crude oil prices have been climbing for months (up 19 percent, to $36.79 per barrel just since the beginning of the year) without a significant change at the pump, and it was only a matter of time before gas prices would spike. But the price of crude is only part of the cost of a gallon of gas, and changes in retail lag those of crude by weeks or months — for the later part of 2002, crude prices were rising while pump prices were still falling slightly.
But with increased public anxiety over a U.S. military action in Iraq and potential retaliatory terror attacks, are retailers unfairly exploiting the situation?
Retailers quickly point fingers back up the supply chain, insisting that they are maintaining the same cents-per-gallon profit margins as usual, and only boosting the price in relation to the rising cost from refiners. Distributors, retailers, and marketers only see about thirteen cents per gallon sold. They insist that prices are not inflated, though a panic-buying spree at the pumps will exaggerate the price swing.
“If consumers rush out and fill everything they have, it actually makes the situation worse,” said Steve O’Toole, executive director of the Oregon Petroleum Marketers Association.
“Don’t start panic buying, because that will just cause panic pricing…and vice versa,” agreed Elliot Eki, an AAA spokesman.
Nationally, this past Friday, the average retail price of regular unleaded was at $1.665 per gallon, up more than 22 cents since the beginning of the year. Left coasters are getting hit the hardest, with the West Coast states seeing prices rise about 40 cents per gallon in the past five weeks and already up to 70 cents above year-ago levels. Regional distributors attribute this largely due to the fact that there are few petroleum refineries, and that petroleum distribution relies more heavily on trucks. San Francisco area pump prices ranked highest in the U.S. as of February 21, according to the AAA, with the average price per gallon of regular unleaded being nearly $2.10 (nearly $2.27 for premium) as of Feb. 21. Meanwhile, average prices in Southern California, Oregon, Washington, and Alaska inched up toward the $2 mark, with many stations charging significantly higher.
Prices remained lowest in the central states, those with low gas taxes, and those near major oil refineries. Oklahoma’s average price was about $1.55, and Georgia was possibly the lowest, at $1.527 per gallon, on average, according to the AAA’s weekly survey of pump prices. In the Atlanta metro area, for example, prices still hover around $1.45 for regular unleaded.
Tips for saving gas
As the price of crude oil has continued to rise, it’s expected that pump prices will gradually climb higher—though not as abruptly as in the past several weeks. It may be a while before prices settle back to where they were just a month ago.
Until then, here are some straightforward ways to help ease the strain on your wallet:
Keep the gas guzzlers in the garage! Super-sized SUV use about three times the gas of a compact sedan—to go the same distance! If you’re not really going to use the space, then why don’t you park the SUV in the garage, take out the city car, and save some money?
Combine trips. Do you need to run a particular errand at the moment, or can you wait and combine it with another trip? If you combine tasks, you’re likely to save time, mileage, and money.
Keep the tires properly inflated. Driving with your tires underinflated is not only dangerous — you also use up to ten percent more fuel. Check tire pressures weekly, or whenever you fill your gas tank. Keep in mind that the pressures given in your owner’s manual or doorsill will be for when the tires are cold: If you’ve just been driving, add 3-4 psi.
Keep your vehicle in tune. If your vehicle is overdue for its periodic service, now’s the time to have it done. Simple routine maintenance items like replacing the fuel and air filters, maintaining the ignition system, and changing the oil can make sure your vehicle is getting its best mileage. Check your owner’s manual for more service/replacement intervals.
Maintain steady speeds whenever possible Avoid quick starts. Accelerate moderately to your desired cruising speed and maintain it, using the cruise control for long distances where traffic isn’t an issue. In traffic, try to anticipate the vehicles ahead so you don’t have to vary your speed as much.
Obey speed limits! Most cars use much more fuel at 80 mph than at 60 or even 70. Keep to the speed limit, and you’ll probably notice a difference in your pump budget. And since traffic’s usually the real issue, chances are you’ll get there almost as quickly, too.
Turn off the A/C at low speeds. Air conditioning systems demand a significant portion of the engine’s power, especially at low speeds. Around town, at less than 40 mph, you’ll save fuel by keeping the A/C off. At higher speeds, it usually uses less energy to instead keep the windows rolled up and use the A/C as needed.
Don’t be idle. Simply put, prolonged idling wastes gas and it isn’t good for your engine either. Whether you’re sitting in traffic or in a parking lot for more than a minute, turn off the engine. Otherwise, you’re wasting it! If the engine’s already warm, it doesn’t take any extra gas to restart.
Use the fuel your vehicle requires. If your vehicle requires regular unleaded, you’re throwing the extra money away by using premium. It likely won’t give any significant difference in performance, fuel economy, or smoothness. But if you have a high-performance vehicle that specifies premium unleaded fuel (there’s usually a reminder inside the fuel-filler door), you may get significantly worse fuel economy with lower-grade fuel, offsetting the lower per gallon cost of the cheap stuff. The fail-safe rule is to just use the grade of gasoline recommended by the manufacturer.