Even the stations don't like gas prices First winter, now this, retailers say as they pass along increases


April 15, 1996|By Sean Somerville | Sean Somerville,SUN STAFF

A long, cold winter and short supplies are driving gasoline prices to their highest levels in 10 months, pinching not only consumers but also gas station owners, industry experts say.

Maryland pump prices have jumped in April by 8.8 cents per gallon of self-serve regular unleaded gasoline, to $1.24.7.

That's the highest month-to-month jump since 1990, when Iraq invaded Kuwait, and the highest price since June 1995, according to the Mid-Atlantic Automobile Association of America.

Meanwhile, the federal government predicted that prices could increase 6 cents more a gallon this summer before easing.

But the Maryland retailers who are collecting the high prices say they are not making out on the deal.

They say their high gasoline costs are the second blow of a one-two punch. The first blow came last winter, when heavy snow kept people off the roads -- and away from the gas pumps.

Mike Atkins, the night manager at Dundalk Citgo on Dundalk Avenue, said the station faced three price increases in as many weeks, but resisted passing them along.

At one point, the station was paying $1.12 a gallon and charging $1.13.

"We held out as long as we could," he said. "To be honest, we probably held out longer than we should have."

Industry analysts attribute the price increases to the classic case of economics -- low supply and high demand.

Domestic gasoline inventories fell to a historic low for this time of year, the American Petroleum Institute reported last week. Analysts say the cold winter kept refiners scrambling to keep up with demand for heating oil.

"Refiners haven't been able to shift to gasoline as early as normal," said Theodore Eck, chief economist for Amoco Corp. in Chicago.

Additionally, Mr. Eck said, the market had anticipated an agreement to allow Iraq to export crude oil, which would have boosted supplies.

The demand for heating oil also depleted crude oil supplies.

The lower supplies have helped boost the prices for crude oil by about 25 percent over the past month, which translates roughly into a 15-cent-per-gallon gasoline increase, Mr. Eck said.

Mr. Eck also said that spring, with daylight-saving time and warmer weather, generally translates into more travel and, thus, higher demand.

Additionally, the Department of Energy predicted last week that higher speed limits and the popularity of sport utility vehicles will help fuel the highest summer demand for gasoline in history.

DOE does not anticipate shortages. The agency said the price of gasoline, now $1.29 averaged across grades, could jump as high as $1.35 and hit a summer average of $1.31.

That would be the highest retail price since 1991.

"The more likely outlook is for a significant weakening of oil prices" amid growing supplies, DOE said. The agency predicts an average price of $1.24 -- equal to the same period in 1995.

Joseph M. Coale, a spokesman for Baltimore-based Crown Central Petroleum Corp., said Crown retailers face the same struggles as others.

But he said refiners are generally doing well.

"There's more margin potential for refiners," he said. "Further down, it has a more negative effect."

Roy Littlefield, executive director of an association that represents service station owners in Washington, Delaware and Maryland, said retailers have suffered through one of their toughest winters in memory.

"Some of the brands were off 6 to 8 percent," he said. "Some people didn't go out for weeks. And the retailers will never make that up."

Will Dolch, the owner of an Amoco station at St. Paul Street and Mount Royal Avenue in Baltimore, said his profit was off by $4,000 in January.

Since March 1, Mr. Dolch has faced 12 increases totaling 13.5 cents. "I wouldn't be surprised if we have another one today," he said Friday.

After sacrificing part of what he said was a 6-cent profit on every gallon, Mr. Dolch finally raised his prices last Thursday to get back to that level. On Friday, he was charging $1.279 for regular gasoline.

"When they went up 1 penny Thursday and 2 cents [on Friday], I said, 'Man, this is crazy. Why should I eat the loss?' " he said.

Raising prices is risky because owners don't know their competitors' costs or their schedules for increases, Mr. Littlefield said.

A station that boosts its price to keep its margin risks losing business to the competitor across the street who's holding out. Mr. Dolch said he benefits from a great location and has more latitude than some dealers in setting prices.

After struggling to keep prices low and customers flowing, Mr. Atkins, at Dundalk Citgo, said the station had to put its prices more in line with its costs.

On Wednesday, the station's sign for regular unleaded read $1.169. With the prices climbing, Mr. Atkins said, "It's only going to last the rest of the night."

Pub Date: 4/15/96

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