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Fill tanks, express thanks

By CHRISTINA REXRODE
Published January 23, 2007

Memo to Florida gas stations: It’s time to dust off the number “1” for your roadside signs.

On Tuesday, nine states saw something we could only dream of over the summer: regular unleaded gasoline selling on average for less than $2 per gallon. The sub-$2 prices are expected to hit the Tampa Bay area in the next couple of weeks and are reportedly already showing up in the Panhandle.

Here’s what’s happening, and why:

How much have prices dropped?

The average price for a gallon of gasoline in the Tampa Bay area is $2.17, down from $2.31 a month ago and $2.35 at this time last year. (Gas prices were in the $2.70 to $2.90 range here from April to September, according to the Oil Price Information Service, or OPIS.)

Why are prices dropping?

The decline in crude oil prices. Crude oil futures were about $61 per barrel on the last business day of 2006. On Tuesday, they closed above $55 a barrel after falling briefly under $50 last week. We’re just now starting to see the effect of the declines since last year because retailers wait until they get shipments of cheaper fuel to lower their prices.

The weather. The country has, for the most part, experienced a mild winter. That’s driven down demand for heating fuels and allowed refineries to devote more capacity to gasoline. OPEC gridlock.

The Organization of Petroleum Exporting Countries plans to cut production to boost oil prices, but powerhouse member Saudi Arabia “hasn’t been terribly compliant,” said James Williams of WTRG Economics, an Arkansas organization that analyzes energy data.

Saudi Arabia is thinking long-term, Williams said. The country doesn’t want oil prices to rise too much, or consumers will start buying more efficient cars.Also, Saudi Arabia knows that driving down the price of crude oil cuts into Iran’s purchasing power, said Jim Smith, president of the Florida Petroleum Marketers and Convenience Store Association. Iran has no refineries within its borders, Smith said, so it relies heavily on sales of crude oil.

Normal seasonal cycles. Even if the price of crude oil is stable, gas prices tend to fall in the winter, then rise by 10 to 20 cents between January and the start of summer, according to the federal Energy Information Administration.

It’s cheaper to refine gasoline in the winter because the Environmental Protection Agency requires refineries to produce cleaner-burning fuel blends and a larger variety of them in the summer. Also, demand for gasoline decreases each winter as people travel less.

Why are Florida’s gas prices higher than the national average?

The average for a regular gallon of gas in Florida is $2.23. Across the state line, gas is selling in Georgia for $2.03, and the nationwide average is $2.16. That’s partly because of taxes.

Florida has the country’s fifth-highest gas tax rate, Smith said. The other factor is the Peninsula Effect. There are no refineries in Florida, making gas shipments to the state more expensive.

“Anything you’ve got to move farther, you’ve got to pay more for,” Williams said. “It probably costs more for Florida oranges in Arkansas. It’s exactly the same thing for petroleum.”

Will prices continue to drop?

Most analysts say Florida’s average price for regular gasoline will drop to less than $2 per gallon by the end of January or middle of February.

It can take as long as eight weeks for decreases in crude oil to fully affect prices at the pump. Of course, those predictions are barring any unforeseen catastrophes.

Said Smith: “People should cross their fingers.”

Christina Rexrode can be reached at crexrode@sptimes.com or (727) 893-8318.

[Last modified January 23, 2007, 20:43:39]