Gas price is down, and so is driving

Trends welcome

how long they last is open to question

October 26, 2005|By MEREDITH COHN AND STACEY HIRSH | MEREDITH COHN AND STACEY HIRSH,SUN REPORTERS

Peggy Ilardo filled the tank of her Chevy Suburban only halfway at a gas station near Towson yesterday in the hope that the price is "going to go down a little bit further."

Based on recent swings at the pump, that seemed a good bet: Gasoline has been getting cheaper in recent weeks, bringing relief to consumers who appear to have been shocked into modifying their habits after a stretch of record prices brought on by Hurricanes Katrina and Rita.

A gallon of regular, on average, dropped to about $2.60 yesterday from a peak of $3.04 registered Sept. 5, a week after Katrina struck Louisiana and Mississippi.

Still, average prices are up across the nation about 57 cents from a year ago, according to government statistics.

Federal energy officials estimate that a gallon could fall as low as $2.40 in coming weeks, but other fuels, such as home heating oil, are unlikely to drop at all.

Price-conscious motorists have turned to the Internet to help them find the cheapest providers.

GasBuddy reported that hits on its 173 Web sites soared to 4.5 million a day from 800,000 after the Gulf Coast hurricanes.

The AAA motor club's Fuel Finder initially doubled to 108,000 daily hits from about 56,000 a day in August, although the Web traffic dropped back down to nearly 44,000 this month.

Fuel consumption generally drops in the fall, after the summer vacation season, but motorists might be driving even less than usual. The drop in demand, coupled with record imports to make up for fuel lost with refinery outages, has dampened gas prices, according to government and industry experts.

"Prices have been coming down," said Doug MacIntyre, a senior analyst with the Energy Information Administration. "But we need more time to tell if people have really changed their habits. For a while, people were targeting $3 gas as providing the jolt to change behavior, but on the flip side, the public would need to believe that it would be at that level for a significant period of time to join carpools or whatever."

Prices will continue to fall as the refineries knocked out by the hurricanes come back online, he said. About one-quarter of the nation's capacity was off-line at one point.

Although not all refineries are back up or at full strength, total output is about the same as before Katrina and Rita because others are producing more, MacIntyre said.

This week's Hurricane Wilma, which battered South Florida, wasn't expected to impact refineries.

The nation generally imports about 10 percent of its gasoline from overseas, but imports have reached record levels during the past three weeks. Imports, usually about 1 million barrels a day, are now above 1.5 million barrels. Americans use about 9 million barrels of gas a day.

The extra has come from European countries that stockpile gas. The U.S. does not stockpile refined oil products.

Home heating oil, which is similar to diesel fuel, has not been imported, and demand is not waning. So, homeowners can still expect to pay significantly higher prices this winter, MacIntyre said.

Before the hurricanes, diesel was 2 cents cheaper than gas. Now it's 56 cents more, at $3.16 a gallon.

Rayola Dougher, manager of energy market issues for the American Petroleum Institute, said the prices reflect classic supply and demand.

"Prices are down for the same reason they went up," she said. "For gas, demand always moderates at this time of year and there is more production online, more imports."

She estimated that consumption was down 4 percent to 6 percent more than usual, which was higher than the government estimates of 1.5 percent. The institute's surveys show consumers have been using less fuel by driving less and maintaining their cars. The surveys will continue, to see whether the habits are permanent or temporary, she said.

Ragina Averella, spokeswoman for AAA Mid-Atlantic, said demand is off, but she couldn't say whether it is off more than usual. But perhaps it is off more than usual in places such as Maryland, which saw prices higher than the national average.

The highest price per gallon on average in Maryland was posted Sept. 6 at $3.27. The highest average price nationwide was recorded Sept. 5 at $3.08, according to AAA's figures. The motor club has joined with state government officials in questioning oil companies about the price spikes.

At the Woodbrook Exxon station at Charles Street and Stevenson Lane yesterday, Peggy Ilardo spent $50.50 just on her half-tank of gas.

"It's still high when you're trying to consider what the oil prices are going to be just to heat a home," she said. "It's helpful, but it's still high."

Ilardo, who lives in Baltimore, has been using her other, more efficient car - a Volkswagen Beetle - more frequently, arranging more carpools for her kids and cutting out unnecessary trips.

Steve Merrill, who owns the gas station, also hopes to see prices continue to drop. So far, the decline hasn't affected buying.

"November and December can often be the most demanding months, your highest volume," Merrill said. "Thanksgiving is traditionally a very high gasoline time of the year because people travel."

Regular gas at Merrill's Exxon was $2.59 a gallon yesterday. But even with prices dropping, Merrill said that motorists base their decision of where to buy gas largely on customer service and station location.

Location was what drew Chris Leahmann to the Exxon yesterday. He was running low on gas and lives nearby. But with four kids and a Ford Expedition, gas is such an expense that he is planning to get rid of the sport utility vehicle. The family recently bought a minivan to replace it.

"We run them all over the place," he said, "and this costs $80 to fill."

meredith.cohn@baltsun.com stacey.hirsh@baltsun.com

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