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Suddenly, fillup feels lot less like a stickup

Gas prices have dropped 54 cents a gallon in the past six weeks, bringing sweet relief to drivers' pocketbooks.

By CHRISTINA REXRODE
Published September 21, 2006

With gas prices, maybe the only thing that's certain is their volatility.

A month ago, a gallon of regular, unleaded gas in the Tampa-St. Petersburg-Clearwater metropolitan area was $2.91 a gallon - just nine cents less than the highest price ever recorded here, in September 2005.

By Wednesday, it had tumbled 15 percent to $2.46.

"I'm watching things fall off the cliff today," said James Williams of Arkansas-based WTRG Economics, which analyzes energy data.

The federal Energy Information Administration reported Wednesday that the nation's weekly average price per gallon has fallen 54 cents in six weeks, including a 12-cent decline in the past week.

That's the second-largest uninterrupted decline that the organization has recorded, trailing only a nine-week, 78-cent drop last year after Hurricane Rita.

In fact, prices have fallen so fast that there's wide discrepancy in the numbers hanging over area stations.

According to gasbuddy.com, where drivers record prices they encounter, Wednesday's prices near downtown St. Petersburg ranged from $2.26 per gallon at a RaceTrac on Gandy Boulevard to $2.45 at a Texaco on Tyrone. Near downtown Tampa, prices ranged from $2.29 to $2.62.

Don't assume that the stations with the more expensive gas are trying to rip off their customers, said Jim Smith, president of the Florida Petroleum Marketers and Convenience Store Association.

Many factors other than the wholesale price of gas affect retail prices, Smith said. Gas stations near the water, for instance, probably pay more in real estate taxes and property insurance. Their payroll and utility costs can also vary. And some stations still need to replace underground storage tanks to meet the state's 2009 deadline for double-walled tanks, which costs most facilities about $250,000.

Also, a station's prices vary depending on how often they must resupply their storage tanks. "The locations that sell a lot of fuel will have the benefit of bringing in cheaper product faster," Smith said.

But even at gas stations where prices exceeded $2.50, drivers could fill up for a relative bargain, compared with a few weeks ago.

So why are prices falling? A calmer political atmosphere in the Middle East, a calmer storm season over the Atlantic and the end of the busy summer travel season are all factors.

Also, the Environmental Protection Agency implements "fuel boutique" requirements on refineries each summer, requiring them to offer cleaner-burning fuel blends and a larger variety of them. Those requirements ended Friday, which means refineries can operate more efficiently.

Light, sweet crude oil for October delivery fell $1.20 to $60.46 a barrel Wednesday on the New York Mercantile Exchange. Oil prices had reached a record high of $78.40 per barrel on July 14.

There could be even lower prices on the horizon. Barring any catastrophic events, experts said, gas prices will continue to decline for the next few months.

"Exactly where it ends, who knows?" said Tom Kloza, of the Oil Price Information Service in New Jersey. "It would be witchcraft to guess."

But he took a shot at it anyway, predicting that prices will bottom out between $2 and $2.25 per gallon in November.

Don't get too comfortable. Gas prices, as a rule, rebound in the spring. And, while American demand for gas is slowing with the end of summer, worldwide consumption isn't decreasing, said Gregg Laskoski, spokesman for AAA Auto Club South.

By November, Laskoski said, refineries will have to devote more of their capacity to producing heating oil. And, he said, there's nothing to prevent OPEC from cutting oil production if it decides that prices have fallen too low.

While the price drop has drivers buzzing, this isn't the first time oil prices have fallen so quickly, said Williams, the WTRG economist.

In 1986, Saudi Arabia ramped up oil production to send OPEC a message, tripling the barrels per day it had been producing from 2-million to 6-million. As a result, oil prices fell from about $25 per barrel at the beginning of the year to $12 by March.

But something similar couldn't happen today, Williams said, because no country has enough spare oil.

In September and October of 1990, after Iraq invaded Kuwait, oil prices rose to about $40 a barrel, he said. By the middle of November, oil prices were down to $29, and by February 1991, they were back to their pre-invasion level, about $20 a barrel.

The lower gas prices are some relief for Janet Hughes, 51, who drives throughout the state as a general contractor for Standard Demolition in Tampa. In the past year, she has put 16,000 miles on her Jeep Liberty.

"It's made me very happy," she said of the lower prices. "It helps."

But the relief stretches only so far. Her homeowners insurance premium has jumped from about $700 to $2,400 in the past two years, swallowing any relief that lower prices at the pump might bring.

"That's what's kept me from stopping at Starbucks and things like that," she said. "Not the gas."

By the numbers

$1.25-billion: Amount that Americans spent on gas each day during the first week of August.

$960-million: Amount spent each day this week.

Bay area prices

Average price for a gallon of regular gas in the Tampa-St. Petersburg-Clearwater metropolitan area:

$2.46: Wednesday

$2.91: One month ago

$2.78: One year ago

National prices

$2.47: Wednesday

$2.93: One month ago

$2.79: One year ago

Source: Oil Price Information Service

WHY THE PRICE IS DROPPING

Tensions ease

The threat of war with Iran is perceived as decreasing, and fighting between Hezbollah and Israel has waned.

Drop in demand

With Labor Day over, the next big driving weekend isn't until Thanksgiving.

Calm weather

No major storms have been forecast to drive up speculation, and refineries that were disabled during Hurricane Katrina are back on line.

Efficient production

The EPA's annual summer requirements on the blends that refineries must produce ended Sept. 15, allowing them to operate more efficiently.

[Last modified September 21, 2006, 01:09:38]