Gas prices: Expensive or the new normal?

Prices down 50 cents from May peak but hardly at a low

July 02, 2011|By Michael Dresser, The Baltimore Sun

As Maryland drivers cruise into the Fourth of July holiday weekend, they can think of their gas tanks as either half-empty or half-full.

By historical standards, the average price of a gallon of regular gasoline here remains high: $3.56 on Friday, up a third from $2.70 on the same date a year ago, according to AAA Mid-Atlantic. But compared with a week ago or a month ago — and especially when measured against the near-record $4.04 registered on May 12 — the current price looks like blessed relief.

How gas prices will influence Marylanders' travel decisions this holiday weekend is difficult to predict. Earlier this week, AAA projected a 2.9 percent decline in the number of state residents planning to travel this holiday weekend. But on Wednesday, AAA spokeswoman Ragina Averella hedged on that prediction, noting that the survey it was based upon took place from May 26 to 30, when gas prices were still uncomfortably close to $4.

"I wouldn't be surprised if more people in fact did decide to travel because of the recent decline in gas prices," she said.

That drop has shaved almost a quarter off the average Maryland price in the past month, when prices were just above $3.80. Averella said AAA expects to see the declines continue at least for a while as gas prices trail the falling price of crude oil on world markets — a decrease accelerated by the recent decision of President Barack Obama to release 30 million gallons from the U.S. Strategic Petroleum Reserve.

"We expect to see a continued decline down to the $3.25-$3.50 range," Averella said.

Gas prices in Maryland are neither at record highs nor at comfortable lows — leaving it unclear whether the market has reached a "new normal" or is falling back to last year's levels.

Whatever happens in the short term, Ocean City officials and merchants aren't fixated on the gas pump. Town spokeswoman Donna Abbott said "weather rules" in determining visitor levels at the resort, with gas prices far behind as a factor in regional travelers' decisions to visit.

Abbott said both the weather and the business forecast look sunny at the beach. She said Ocean City exceeded last year's visitor count every June weekend but one this year — and the exception was the result of a change in the date of its annual air show. She added that bookings for the holiday weekend looked strong.

"I'm hearing that they're good, but there's still availability," she said.

Even in April, when gas prices were nearing their high for the year, Ocean City posted a gain in room tax receipts of 8.1 percent over last year, Abbott said.

"Typically, when gas prices have been a factor, we have not seen any decline in visitors, given our proximity to major metropolitan areas," she said.

Falling gas prices notwithstanding, a handful of Ocean City hotels continue to offer gas card promotions to draw in business. Most require a stay of three days or more for cards providing discounts of $20 to $50 on a fill-up, according to the resort's "Rodney Saves" promotional website.

As is usually the case in Maryland, motorists who buy their gas near the ocean are getting the best deals in the state. The average price Friday in Salisbury was $3.39, according to AAA; it was $3.54 in Baltimore and $3.61 in suburban Washington.

Wide variations in price also remained between the state's high-price zones and its havens for economical buying. The costs reported Friday by ranged from $3.28 in La Plata to the $4.29 being charged at a couple of places in Bethesda.

For most motorists, prospects beyond the next month or two are murky. It remains unclear whether $3.50 gas is a way station to historical levels or the new normal preceding another record-challenging spike.

Averella declined to speculate about the possibility of gas prices dropping below $3 a gallon. She pointed to the uncertainties of geopolitics and this hurricane season's impact on refinery capacity.

"We don't have a crystal ball," she said.

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