The pinch at the pump

Gas prices rise faster, sooner than usual

March 14, 2007|By Meredith Cohn and Allison Connolly | Meredith Cohn and Allison Connolly,SUN REPORTERS

They are not the wallet-draining highs that followed Hurricane Katrina.

But gasoline prices are up across the region and the nation a little earlier and a little more sharply than normal this year, as motorists head into the spring driving season. So, many consumers are worried that summer prices will be worse, even if they don't top last year's $3 a gallon.

Analysts say there are a number of reasons that the costs of gasoline and the crude oil it's made from are rising - including world unrest, growing demands in Asia, the need for corn that is being made into ethanol and a really cold February. Even a wayward opossum created havoc at one refinery in California, which limited supplies.

Whatever the causes, an average jump of 34 cents for a gallon of regular self-serve in Baltimore during the past month and 20 cents more than a year ago has not gone unnoticed by drivers. The average price locally and statewide was $2.51 a gallon yesterday, according to AAA Mid-Atlantic.

And while prices are still below the record in Baltimore of $3.31 on Sept. 6, 2005, days after the Gulf Coast was battered by Katrina, consumers say they feel pinched.

"This thing is 38 gallons, and it eats through it," said Chris Clifton of Sykesville, about the tank on his black and chrome Ford 350 pickup parked yesterday at the Amoco at St. Paul Street and Mount Royal Avenue in Baltimore. "It's pretty inefficient."

Analysts say prices normally begin to rise at this time of year because demand goes up as drivers begin to take spring vacations. And there are always other world and local factors that play into how much.

The 2005 hurricanes and the prices that followed were enough to dampen demand and even push some consumers to reduce how much gas they use or to buy more fuel-efficient cars. But demand has returned earlier than expected this year, and there isn't sufficient supply to keep prices in check.

Market complications

No one can say how high prices will go this summer, but most are not yet predicting they will top $3 a gallon.

"It's a complicated market," said John C. Felmy, the chief economist for the American Petroleum Institute, an industry trade group. "A lot of things go into the worldwide cost of crude. This rise may be coming earlier than normal, but it's not all seasonal factors."

He said one factor in the United States is the cost of corn that is used to make ethanol, a gas additive mandated federally to reduce fouling emissions and dependence on foreign oil. Ethanol is blended into gas at a rate of about 10 percent in Maryland.

Michael Burdette, a senior analyst for the U.S. Energy Information Administration, said gas typically costs 10 percent more in the summer than winter because of supply and demand.

Rise in crude costs

But he agreed there are non-seasonal factors. Crude oil prices, which had reached almost $78 a barrel last summer and contributed to $3-a-gallon gas, dropped to $50 a barrel in mid-January. The price is now in the low $60s. The jump in the past two months accounts for a 25-cent rise in gas prices by itself.

The nation also hasn't built any new refineries in years despite the growing demand. That means more imports of oil from volatile countries. And there's more competition from other nations such as India and China with growing demand for fuel. It's also unclear what OPEC will decide to do about output at its next meeting tomorrow.

"Still, gas was over $3 a gallon last August and we don't expect prices to reach $3 at all this year," Burdette said. "That's the silver lining."

Marylanders can also take solace in the fact that they don't live in California, which had the nation's most expensive gas yesterday at $3.11 a gallon. Wyoming had the cheapest gas at $2.31, according to AAA.

The regional disparities are the result of differing taxes, efficiency requirements and the origin of fuel supplies. Also, a change in winter to summer fuels means there's less gas in the pipelines to some destinations.

Drivers who live near Los Angeles learned last week that an opossum can knock out power at an electrical substation that powers a refinery, and that can cause gas supplies to dip and prices to rise. According to media accounts, a raccoon caused another California refinery to lose power the same night. Both animals were electrocuted.

Still, Maryland's $2.51 gas isn't cheap, and the cost is expected to continue increasing for now.

Troy Green, a AAA Mid-Atlantic spokesman, recommended combining errands, taking mass transit if it's an option and keeping tires properly inflated to maximize mileage.

"We do not usually see a precipitous drop in gas prices until the end of the summer driving season," Green said.

Melinda Moore of Randallstown, who recently retired, regularly volunteers to drive elderly members of her church to their medical appointments. She said yesterday that it is getting harder for her to do it as often as she would like with gas prices rising.

"They keep saying it's supply and demand and with summer coming up, I don't think it's going to go down," she said. "I just hope it doesn't get like" California.

meredith.cohn@baltsun.com allison.connolly@baltsun.com

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