Gasoline prices rise, drivers adjust habits

17 cents increase in 2 months has little mercy for those with tight budgets

February 18, 2004|By Dan Thanh Dang | Dan Thanh Dang,SUN STAFF

For motorists concerned about rising gasoline prices: It is going to get worse.

Gasoline prices nationwide have jumped about 17 cents per gallon since mid-December, leading many people to consolidate trips, switch to lower-grade fuels, car pool or simply pay more to drive.

The average price for regular unleaded gasoline is hovering at about $1.65 a gallon nationally and a couple of pennies more than that in this region. Industry experts don't expect prices to drop soon.

"I think that prices are going to be at a record high this summer," said Phil Flynn, vice president and market analyst at Alaron Trading Corp. in Chicago. "We could be heading for a disaster. I wish I could be more optimistic."

With crude oil prices in the mid-$30s per barrel compounded by a cold winter, low inventories and a recent decision by the Organization of the Petroleum Exporting Countries to cut production this spring, gasoline prices could hit $2 a gallon by the summer travel season, experts said.

Mark Hough is feeling the pinch.

Hough is chief executive of Tough Construction LLC. He and his employees haul drywall and other materials to residential and commercial construction sites throughout the Baltimore region. At an Exxon station on Cold Spring Lane, it took $42 to fill the 26-gallon tank in Hough's Chevy Silverado one day this week. Each month, he shells out at least $126 to fill his truck's tank.

"What can you do?" Hough, 43, said yesterday. He started storing supplies near his Baltimore home to cut down on the number of trips he makes to buy material.

"My taxes go up every year; my gas goes up every year; something always goes up every year," he said. "Every time I turn around, it's something else. I try to pass it on to customers, but I don't want to lose customers. It hurts everyone."

Cindy Lewis, a behavioral health care trainer, has resorted to pumping into her Toyota compact whatever she can afford. On Monday, she had enough for four gallons of regular unleaded. Her college-age daughters are carpooling to school these days.

"Every time I come, it's a surprise," Lewis, 45, said of her visits to the gas pump. "I'm doing just what I can, filling up just enough to get by."

The Lundberg Survey, an independent market researcher in California, predicted last month that retail gasoline prices will range from $1.71 to $1.96 per gallon by April.

The U.S. Energy Information Administration said yesterday that it expects prices to rise gradually.

"I don't think there's going to be any spiking of prices," said EIA economist Jacob Bournazian, providing what might amount to the only comfort for consumers. "Gasoline prices will probably rise very gently this month. It's still too premature to say what they'll be by summer. A number of factors will determine that, but it's safe to say I don't see any way prices are going to go back down to $1.45 a gallon anytime soon. We haven't seen prices like that in more than a year."

Gasoline prices usually dip this time of year as refineries begin switching from heating oil production to gasoline production to prepare for the summer driving season, experts said. But a cold winter kept many refineries working to keep up with heating demands.

Other factors have also helped keep gasoline prices high.

Retailers have been struggling with higher wholesale prices, the federal agency said. Wholesale prices rose about 20 cents a gallon from Thanksgiving to New Year's. Consumers are now feeling a direct pass-through of that increase.

Also, crude oil inventories this month are at their lowest since 1974. At just less than 270 million barrels, they're at the minimum operating level required by the Department of Energy.

"As long as there aren't any problems, we're fine," said Flynn, the Chicago analyst. "It's sort of like driving to your grocery store when you're running on empty. You might make it, you might not. That's how we're running our nation's crude oil inventory level right now."

That situation could become worse if OPEC follows through with its decision to reduce production by 1 million barrels a day in April. Although OPEC could reverse that action when it meets next month, the international organization said it could also decide to cut production again in May if supply curbs in April are not enough to keep prices between $22 and $28 a barrel.

"It's going to keep prices at fairly high levels," said Doug Ober, chairman and chief executive officer of Petroleum & Resources Corp. "But I don't see it getting much worse. We can probably run satisfactorily as long as there aren't any glitches. We could see a spike, but how high that could be, we don't know. ... If OPEC decides to further curb production, then all bets are off."

For an indication of where average prices for gas will end up, experts point to California.

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