Boston: Gas prices fuel concerns

www.townonline.com By Erin Clossey / Staff Writer Friday, March 7, 2003

Tom Clarke has his favorite gas station, he's been going there a while. But during the past year, the Everett Avenue resident has been known to stray from his usual filling spot, searching out cheaper fuel for his Volkswagen Jetta.

"I have my eye out when I drive. I have my antenna up," he said.

Prices at the pump have become outrageous compared to only a few months ago. The average price per gallon of regular unleaded gasoline in Watertown is $1.69 - with a high of $1.79 and a low of $1.63. Independent stations are able to charge less than name-brand dealers, but anywhere you go, you're going to pay more for gas than you're accustomed to.

"I try to conserve, I look for the best priced station, I do," Clarke said.

He's not the only one trying to conserve. At Toyota of Watertown, there has been a "flood" of interest in the Prius, Toyota's electric/gasoline hybrid model, said Craig Heinonen, sales manager.

People are still buying gas-guzzling sport utility vehicles, Heinonen said. But many are trading in their SUVs for more gas-efficient cars these days, and sales of the Prius have gone up about 50 percent in just months, he said. Heinonen admitted that a lot of that had to do with increasing awareness of hybrid vehicles in general, but he believes that soaring gas prices are a huge factor.

The Prius gets 52 miles to the gallon on the highway. The Sequoia, Toyota's largest SUV, gets about 17 highway miles to the gallon.

"When people see 52 miles to the gallon, right away, they're saying 'wow, look at this,'" he said.

There are three major factors contributing the price of gas today, said Mark Williams, professor of finance and economics at Boston University's School of Management and a former senior vice president of global risk management at Citizens Power Boston. A looming war in Iraq, political upheaval in Venezuela, the world's third-highest producer of crude oil, and general instability in many of the 10 countries that make up OPEC all have contributed to driving the cost of oil per barrel up by 60 percent in a few months, Williams said.

What this country considers a "reasonable" cost of oil is about $25 per barrel, which is where it was last fall, Williams said. Today, oil costs around $40 per barrel, and the futures on Wall Street aren't predicting a return to normal pricing until June 2004, he said.

This obviously means heartbreak for consumers (although Williams said the 60 percent increase in the cost of oil has only translated to an increase of 23 to 25 percent in gas prices at the pump. If the cost rose proportionately, we'd all be paying $2.50 per gallon). Williams said he was still surprised on a recent morning to put $25 of gas into his car, and instead of seeing the needle jump all the way to full as it normally does, hover around the three-quarter mark. He nonetheless was able to get away with only $1.85 per gallon for high-octane gas at an independent dealer.

"I felt pretty proud," he said.

As of early this week, the cheapest gas in town was at Belmont Street Auto, which sells gas under the generic label, XTRA. Owner/manager George Artin said he scouts out other filling stations in town and tries to under price them. His price of $1.63 per gallon was 2 cents cheaper than the next lowest price, offered by most of the other non-brand name stations and Getty and Hess stations.

About 80 percent of his customers are regulars, Artin estimated, but the gas is just a lure to get people into the heart of his business, the repair shop.

"Believe me, nobody makes money on gas," Artin said.

Stations who sell name-brand gasoline generally charge more for their product because factored into the cost are fees charged for the privilege of displaying the Mobil or Sunoco name. But octane to octane, gas is the same wherever it comes from, Williams said.

As owner/manager of S&P Shell on Orchard Street, Bill Kaufman said he is forced to charge higher prices for his gas ($1.79 per gallon) in part because of Shell Corp.'s pricing system, which has prompted a number of local dealers take Shell to federal court.

A completely Shell-owned and operated station in Waltham is able to charge just $1.65 per gallon, which Kaufman says is less than what he pays for the gas. But because he is an operator who leases the full-service gas and repair station, Kaufman has a lot of overhead he needs to worry about. Shell took away its rent incentives to dealers, and because Watertown only permits full-service gas stations, he must also pay someone to pump gas, he said.

Gas prices haven't mattered much yet to Ron Dilbarian. Because he is currently out of work, so does less traveling than he typically would, he said. But he still goes to the Sunoco station on Bigelow Avenue to fill up his Ford Taurus, regardless of what other stations are charging, because it's so convenient to his East End home.

"Nothing has changed," he said.

Erin Clossey can be reached at eclossey@cnc.com.