Gasoline prices have been rising over the past month as revolutionary sentiment roiled the oil-rich Middle East. Now, drivers are bracing for more volatility at the pump, fueled by the latest turmoil in Libya.
The average price of regular gasoline in Maryland on Wednesday was $3.14 a gallon — 14 cents higher than in December, according to AAA Mid-Atlantic. Analysts say the price could reach $3.50 to $3.75 a gallon in the coming months.
Libya accounts for only about 2 percent of the world's oil production, but unrest in the country — where dictator Moammar Gadhafi has been accused of ordering troops and mercenaries to kill unarmed protesters — has stoked fears of increased instability across the region. Oil markets are especially sensitive to disruptions to this major link in the global supply chain.
Some analysts have raised the specter of $5-a-gallon gasoline if street protests and violence spread to other countries, in particular Saudi Arabia. While that country appears unlikely to become destabilized at the moment, it supplies nearly 9 percent of U.S. oil imports.
"That's the fear out there right now," said Tom Kloza, chief oil analyst with the Oil Price Information Service, an energy information firm.
Jittery oil markets responded Wednesday to disruptions of crude production in Libya that reportedly worsened as oil companies curtailed operations and removed employees from the country. The price of heavily traded Brent crude oil rose more than $5 to top $111 a barrel. A month ago, the crude cost about $97.
"The spot market for petroleum is pretty volatile right now," said Neil Gamson, an economist with the U.S. Department of Energy.
Libya exports most of its oil to Italy and other European nations. But if Europe can't buy oil from Libya, it is expected to turn to countries that the United States buys from — which would drive up oil prices worldwide, analysts said.
Gasoline is refined from oil, and the prices track each other. For every dollar increase in the cost of oil per barrel, the average price of regular gasoline climbs 2.4 cents a gallon, said Christine Delise, a spokeswoman with AAA Mid-Atlantic. Before the Middle East unrest, the price of gasoline had been expected to rise to about $3.35 per gallon in the next few months, following a pattern of surges in the spring as drivers take longer trips and demand increases.
Gas price volatility affects drivers and businesses.
Daniel Waldman, who runs the public relations firm Evolve Communications, said he's on the road at least three days a week to meet clients and is girding for higher gas prices.
"All of a sudden you're paying a ridiculous price," he said. "You realize, 'I could have gone out to dinner with that, to a nice restaurant!'"
The Elkridge-based Kane Co., whose businesses include Office Movers, Office Shredding and Office Installers, operates a fleet of more than 100 moving trucks as well as 25 tractor-trailers, according to Chief Operating Officer Ron Meliker.
"It's just additional cost that in many cases our customers do not pay, based on contracts we have," he said. "We literally have to absorb that cost and take care of the customer."
But if the price of fuel continues to rise, rates would go up as well, he said.
To contain costs when diesel prices spike, routes are examined to ensure they are efficient, Meliker said. The company has also studied how to cut fuel use — and reduce environmental impact.
Last year, supplemental batteries were installed on moving trucks so drivers wouldn't have to leave engines running to power lift gates. The company is also weighing the costs and benefits of hybrid and electric trucks.
Gasoline prices affect the cost of all kinds of goods and services — as well as family budgets.
The online grocer Peapod charges up to $9.95 for delivery, depending on the cost of the order, and adds a fuel surcharge when the price per gallon exceeds a certain amount, said company spokeswoman Elana Margolis. But some customers turn to the delivery service to cut the cost of operating their own vehicles, she said.
"We do find some customers tell us, 'We'd rather order Peapod,'" she said.
Ed Ellis, owner of Ocean Petroleum Co., supplies 120 gas stations from New Jersey to Virginia. Ocean also operates the Sunoco stations at the Maryland House and Chesapeake House rest areas on Interstate 95.
He said that when gasoline prices rise above $3 a gallon, families stop taking recreational drives, teens don't tool around in their cars and commuters start carpooling.
He's feeling the pinch as well, because the price of diesel to run his 15 tank trucks is rising, he said. He's turning a watchful eye to the Middle East, worried about the possibility of more significant oil interruptions.
"The situation, in my view, is borderline chaos in the Middle East," he said.
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