PETROLEUM A sign of the times - Gasoline price tops $2 a gallon at area station

www.buffalonews.com By MATT GLYNN News Business Reporter 3/18/2003

SHARON CANTILLON/Buffalo News The price of premium gasoline went over $2 a gallon at a Mobil station on Sheridan Drive and Millersport Highway in Amherst, where Tyson Behnke was filling his tank.

Call it a sign of the times: a gas station in Amherst is charging more than $2 for a gallon of premium gas. Many motorists around the region might still be filling up with the lowest-price grade of gas, which is averaging $1.77 in the area, according to a survey by the American Automobile Association.

But seeing premium gas cross the $2 mark is an attention-getting reminder that fuel prices are still rising. And some of the same factors blamed for the increase over the past few weeks - such as a looming war with Iraq - haven't gone away.

The owner of the Mobil station at Sheridan Drive and Millersport Highway referred questions about his gas prices to ExxonMobil officials.

Gas prices around the region - up 43 percent for each grade from a year ago - have some motorists fuming. But a spokesman for a convenience store group contends the owners of those stores aren't making much off fuel sales.

The typical profit margin on gasoline for those retailers nowadays is about 10 percent, before they cover expenses, said Jeff Lenard, a spokesman for the National Association of Convenience Stores.

A retailer who sells gas for $1.70 a gallon might buy it for $1.53, before taking out 1 to 2 percent for distribution costs, 2 to 3 percent for operating expenses and about 3 percent for credit card transaction fees, Lenard said.

"You're talking about a nickel or so a gallon of profit," he said.

In the past, the group has published brochures to hand out to convenience store customers, to explain the price hikes.

Lenard said some store owners make less on gasoline as the price goes up, if they eat some of the higher cost to stay competitive with rival stations. Some retailers try to make up the difference as wholesale prices begin to drop, he said.

Higher gas prices can also cut into a retailer's in-store sales, he said. A customer who used to spend $15 on gas and $5 on items in the store might now spend the entire $20 toward fuel, he said.

A host of factors - production problems in the West, oil prices forced up by the prospect of war, and a drop-off in imports from Venezuela - have been blamed for spurring the increases at the pump.

The price of crude oil has nearly doubled in the past 12 months, and the retailers have adjusted their prices to match that reality, said ExxonMobil spokesman Barry Wood.

Motorists in two states, California and Hawaii, are paying an average of more than $2 per gallon for the lowest-priced grade of gas, the AAA reports. And in seven states, motorists are spending an average of at least $2 per gallon on premium gas.

Robert Klein of Delta Sonic Car Wash Systems noted how much things have changed since early 2002.

"A year ago, I would have liked to stay under $1," he said. Now Delta Sonic's cheapest price is $1.66 for regular gas, though most of its stations sell it for $1.70. He estimates about 80 percent of Delta Sonic customers buy that grade.

Diesel fuel prices are also closing in on a record. Monday, diesel in the Buffalo Niagara region sold for an average of $2.02 per gallon, just four cents away from matching a record set two years ago, according to the AAA.

Motorists hunting for slightly lower fuel prices might catch a break on the New York State Thruway.

The Thruway Authority directs those gas stations to keep their prices close to what nearby competitors are charging, said Terry O'Brien, a Thruway spokesman. But since those prices are adjusted only weekly, they sometimes lag increases at competing stations.

Gasoline prices jumped another 1.6 cents this week to a national average of $1.728 a gallon, eclipsing the record high set in May 2001, the Energy Information Administration said Monday.

The EIA has predicted that prices would continue to soar at the pump because of tight supplies and high crude oil costs and reach an average of $1.76 cents a gallon next month.

Motorists probably will pay more than $1.70 cents a gallon through the summer driving season, the agency said.

In its weekly gasoline price tally, the EIA said Monday that regular gasoline prices ranged from a low of $1.61 a gallon along the Gulf Coast to a high of $2.145 a gallon in California, a jump of about 6 cents a gallon from a week ago in that part of the country.

Before this week, the highest average gasoline price recorded by the EIA was in May 2001, when motorists paid an average of $1.71 a gallon at pumps across the country.

e-mail: mglynn@buffnews.com