Brace for shock at pump: Gas prices may reach highest level in history

Houston Chronicle ^ | 8/22/02 | NELSON ANTOSH and JENALIA MORENO

[truthandlife]

The highest gasoline prices in history appear to be just down the road.

Dwindling supplies in the face of increased demand threaten to push pump prices over the national record set last mid-March, when markets were shaken by the prospects of a war with Iraq.

On Thursday, the markets "went ballistic," says Tom Kloza, chief oil analyst for the Oil Price Information Service in Lakewood, N.J. That means the highest pump prices ever seen are just a few days away.

The futures price in New York jumped Thursday by more than 9.5 cents, the biggest move since 1991, while cash market increases of 10 to 15 cents were common across the country, Kloza said. The wholesale price in California is already at a record.

That puts the nationwide retail record average of $1.722 on March 18 within striking distance, as well as the Texas record average of $1.616 also set on that date and the Houston record of $1.639 set May 12, 2001.

"The pump prices are moving," said Alan Stanley, an oil trader who didn't see anything less than $1.55 on his drive home Thursday afternoon. The wholesale market follows the futures market on a daily basis, he said, and pump prices trail not long after that.

"Isn't it pitiful," Mary Mechler asked while paying $1.56 a gallon at a Chevron station on Washington Avenue. She pumped $18.60 worth into her 8-year-old Toyota Camry, "and I only got three-fourths of a tank."

"Outta sight," said retiree Andrew Elliott, in a pickup that he plans to drive as little as possible. Ray Guerra was surprised by the $1.59 per gallon at a Texaco, speculating that the gasoline sellers are "playing the Labor Day weekend."

AAA spokesman Justin McNaull in Washington said the markets hate uncertainty and that accounts for the big jump in the cash markets.

The current dilemma for drivers dates back to early summer when gasoline inventories were lower than normal, only to be drawn down further in recent weeks. Meanwhile, demand increased as the summer progressed.

A lot of people delayed their travel because of a cold and wet spring in the Northeast and the war with Iraq, according to the AAA. Now they are taking a last shot at summer vacation, with predictions that 28.2 million, or 2.2 percent more than a year ago, will travel by motor vehicle on Labor Day weekend.

Meanwhile, gasoline output has been hampered by a spate of refinery problems, and gasoline imports have fallen.

The Wednesday federal inventory report showed another weekly decline in gasoline, but it wasn't until one of the biggest refiners in the Northeast started buying in New York harbor that prices really took off, said Kloza.

This action "spooked a lot of the others," who began to worry about getting enough gas of the right specifications to make deliveries on contracts.

Stanley said that people realized, all of a sudden, "there really aren't that many barrels for sale out there."

But the high prices aren't expected to last for long. Gasoline that sells on the West Coast for the equivalent of crude oil at $77 a barrel isn't realistic and will correct itself, according to Kloza.

And high prices will take a toll on demand, which could back off even before Labor Day, said Stanley. Demand usually stays fairly strong until Labor Day, then drops.

Another positive wild card for motorists is that imports could be drawn back into the United States by the high prices here, said McNaull of the AAA. They fell recently because the Europeans found better margins at home, he said.

[WestPacSailor]

Looks like time to break out the bike or buy a bus pass. I'm glad my commute is only three miles. I use less than a tank of gas a month.

[joesnuffy]

Our "good friends"....the (Wahhabis...Saudis are loving it)
I dont suppose the Republicans or Dems would wanna lower the gas tax and give us a little break now would they?

[Destructor]

So? Destructor owns ExxonMobil stock! Whatever the price of gasoline does is alright with me. I come out ahead if the price goes up. Too bad for all of you timid little wussies that have stayed out of the market in recent years.

[verity]

As long as it is available!

[MaryFromMichigan]

Bummer....

Looks like we picked a bad time to go from a Toyota Camry to a Tacoma....

[HoustonCurmudgeon]

Our "good friends"....the (Wahhabis...Saudis are loving it) I dont suppose the Republicans or Dems would wanna lower the gas tax and give us a little break now would they?

Were it not for the Saudis you would have been paying this price for years. You want to be mad at someone look towards Washington an our (lack of) Energy Policy.

[SouthernFreebird]

Shooooo, glad we had that blood for oil war. /s

[Erik Latranyi]

The price will come back down.

Stop environmentalism and gas prices would be below $1.00 per gallon.

[Mr. Bird]

"Isn't it pitiful," Mary Mechler asked while paying $1.56 a gallon at a Chevron station on Washington Avenue. She pumped $18.60 worth into her 8-year-old Toyota Camry, "and I only got three-fourths of a tank."

Mary, your Camry holds about 18 gallons of gas. Are you telling me that if the price was 20 cents lower that you'd be fine and fill 'er up? That $3.60 is going to kill you, isn't it? Pitiful indeed.

We were paying $1.25 a gallon thirty years ago. Sometimes more. Unless your a long-hauler and fluctuations in the price have a large impact on your bottom line, there's really no justification for whining about an extra dime or quarter when filling your tank. The government could easily lower the price just by repealing the taxes that comprise about a third of the price.

[nathanbedford]

You are exactly right.

It costs nearly $60.00 to fill my Accord here in Germany. Most of this is tax imposed by Greens who want to control how I live.

[MaryFromMichigan]

" We were paying $1.25 a gallon thirty years ago...."

Interesting point.
Figuring in inflation and the much improved gas mileage of today's cars, we're getting a bargain in comparison.

[wayoverontheright]

We were paying $1.25 a gallon thirty years ago.

Exactly, and bottled water is 98 cents a pint. That comes to about $8 a gallon no?

[Mr. Bird]

From "How Stuff Works", a breakdown of prices adjusted for inflation only (no mileage comparisons).

1950 - $1.91 per gallon
1955 - $1.85
1960 - $1.79
1965 - $1.68
1970 - $1.59
1975 - $1.80
1980 - $2.59
1985 - $1.90
1990 - $1.51
1995 - $1.28
2001 - $1.66

[BluH2o]

Contrived shortages in gasoline always start just prior to the Memorial Day weekend in May. Tapper off in early June only to spike back up as 4th of July approaches ... then another lull 'till late August in anticipation of gouging drivers still again over the Labor Day holiday. Petroleum industry will again, per usual, deny any culpability in price gouging ... yeah, right!

[11B3]

"Too bad for all of you timid little wussies that have stayed out of the market in recent years."

So, rich boy, what have you got to say to those of us who don't make money on other's misery? (Or should I say "the little people" that are too busy just making ends meet instead of gloating about the contents of our portfolios?)

People like you make farmers like me wish we could designate exactly who gets our food and who doesn't. Think about that the next time you're at the grocery store "where all of the food comes from".

ESAD! (That'd be the crop you would get from me.)

[Dog Gone]

Our "good friends"....the (Wahhabis...Saudis are loving it)

The price of gasoline and the price of oil don't really have much to do with each other. They fluctuate independently depending on the demand for each.

If all our refineries exploded on the same day, what would prices do?

Gasoline would immediately soar. Oil would plummet because there would be no place to use it.

So, unless the Saudis are selling us gasoline instead of crude, this temporary shortage of gasoline in America doesn't benefit them at all.

[Incorrigible]

Right on Mr. Bird!

I posted a similar chart to help folks understand why supersize SUVs were so popular in recent years.

Gasoline has never been cheaper. Wonder if the talking heads on TV will ever present it that way.

[BushCountry]

These girls say this article is full of crap. Here is why? An article from a week ago.

NEW YORK - Oil prices plunged to their lowest settlement of the month Wednesday, after government and industry reports showed largely unexpected growth in U.S. crude oil inventories.

"Everybody knows the party's just about done now," said Bill O'Grady, analyst with A.G. Edwards.

[MaryFromMichigan]

(no mileage comparisons)

Cool chart.

Wonder how my Dad's car back in the '60's would compare to my little Saturn with it's 32 mpg. He had a LOT of kids so we always had some big old thing.

[Dog Gone]

Please explain why the evil petroleum industry ever lets prices fall. Why not gouge you 365 days a year?

[biblewonk]

I bought my bicycle 3 years ago when gas was 1.71 in CR Ia. Now I have 7000 miles on it and I prefer it to any of my other vehicles.

[biblewonk]

There is a difference between crude inventories and gasoline inventories.

[Dog Gone]

Apparently those girls don't know the difference between crude oil and gasoline.

[PatrioticAmerican]

I'm rich and work a walk away from home, so I guess I don't give a rat's patooey. So, there, you eco-terrorists who drive POS unkept gas guzzling beaters who won't let us drill on American soil.

[New Horizon]

...after government and industry reports showed largely unexpected growth...

I just had an unexpected growth myself.

[MaryFromMichigan]

Too subtle- care to elaborate your point? ;)

[gulfcoast6]

Thanks little tommy d.

[BluH2o]

Why not gouge you 365 days a year?

That's easy ... economics 101 ... demand. They don't want to screw motorists on a year 'round basis because eventually their customers will find an alternate form of transportation.

[tubebender]

87 octane is selling for about $2.20 a gallon in Eureka including the Federal Tax, the Cal road tax plus the .0725 sales tax. My wifes car is the Supercharged 3.8 Buick Riviera and requires premium at $ 2.45 a gallon. (actually cheaper at the "card lock" we buy at)

[Mr. Bird]

Well, let's actually be generous and assume your dad bought a practical vehicle that received on average 15 mpg. Let's say he drove 12,000 miles in a year. He would have spent, in the inflation adjusted dollars, $1,344 on gasoline in 1965. You, on the other hand, driving those same 12,000 miles at 32mpg are spending, in the same dollars, $645.

Cha-ching!

[smiley]

No joke...fueled up this morning at 1.65 and a few blocks down the road it was 1.69 and this was early Friday morning. It will go even higher on the way home!

[BushCountry]

This typical summer price gauging, once the holiday weekend is over prices will go down. Several refineries were shut down for maintenance right before this big summer travel weekend, also the blackout shut down 6 or 7 refineries for a couple of days. Increased demand with decrease output means price gauging.

This is history repeating itself, no biggie.

[Dog Gone]

It will probably surprise you to learn that gasoline is a commodity, much like corn and pork bellies. Nobody sets the price of corn. The market does. Traders at the New York Mercantile Exchange buy and sell gasoline contracts all day long and prices fluctuate based on perceptions of supply and demand. That's how gasoline prices are set.

Your simplistic view that oil companies are gouging you with price fluctuations is not based in the real world.

[MaryFromMichigan]

Interesting perspective! Thanks!

To who it may concern-
A thought for the day:
"God made us Freepers, Prozac made us friends."

[Matchett-PI]

"It costs nearly $60.00 to fill my Accord here in Germany. Most of this is tax imposed by Greens who want to control how I live."

They're called DemocRATS and Nader-ites as well as "Greenies" here in the USA.

[BluH2o]

Your simplistic view that oil companies are gouging you with price fluctuations is not based in the real world.

No doubt you work in that industry since you seem to be an advocate for the oil companies. Fact is, shortages, contrived or otherwise, have been around as long as there has been commerce. A few years back there was a coffee shortage, going back further a sugar shortage. Petroleum shortages occur like clock work, every year prior to major holiday weekends ... it's called "charging what the market will bear" ... when done with this type of consistancy it's also known as gouging.

[Tallguy]

This is more of a refining problem according to the article.

[Tallguy]

This typical summer price gauging, once the holiday weekend is over prices will go down.

The next factor will be when the refiners start switching over to heating oil. This will further reduce gasoline capacity and tend to reinforce the high gasoline pricing.

[GraniteStateConservative]

Has CNBC hired these girls, yet? Replace Capital Report with them.

[WestPacSailor]

There is a simple solution to the high cost of gas. Use less. If demand goes down, supply goes up, and prices go down. Even if prices remain steady, if I use less, I pay less out of my pocket for gas.

[GraniteStateConservative]

Does it surprise you to learn that the oil cartel can keep prices high by keeping production low?

[GraniteStateConservative]

Well, at the moment, oil is nowhere near the OPEC price target band of $22-$28, an average of $25. They could increase supply and get it to $25 and prices for refined inventories would fall and the American taxpayer would get a "tax cut" at the pump.

[lawdude]

Some stations in the Phoenix area at up to $3.99/gal. Generally, the price for reg. unleaded is at $2.19.

[Ditter]

Whine, whine, whine. So this poor woman can only afford 3/4 of a tank? I hate to think what they are paying in Europe for gas now. She should just be thankful she is in the USA.

[Dog Gone]

No. Assuming there was an effective oil cartel, that would be the natural result.

[GraniteStateConservative]

Yes, but gas consumption is a sign of economic health for the nation. It makes no sense for us to be held hostage by the OPEC cartel. If they want to play hardball, we can play hardball, too. $25 is a fair price-- even $27 would be better than where we are. They could adjust production to get us there.

[GraniteStateConservative]

We allow OPEC to get away with keeping oil high because of the State Department idiots. We have plenty of leverage against them, but we don't use it.

[Dog Gone]

Get Iraqi crude back on the market, and that will probably happen.