Gas prices continue on the up and up
We can expect yet more spikes in the hurricane season.
By TOM ZUCCO
Published May 22, 2007
Americans apparently aren't going to let a little thing like all-time record gasoline prices keep them from climbing in their cars this Memorial Day weekend.
But buckle your seatbelts. We could be in for a bumpy ride.
While prices may stabilize in the next month or so, analysts warn they could shoot up again at the height of the hurricane season in August and September.
AAA is predicting a record number of Americans will be on the highway this weekend, with 38.3-million expected to be traveling 50 miles or more, up 1.7-percent from a year ago. Most of those traveling, about 32-million, will be going by car.
This comes as gasoline prices hit new highs Monday across the country and in Florida, and as oil analysts caution that it may be at least a month before prices retreat.
According to AAA, the national average for unleaded regular gas hit $3.196 Monday. In Florida, the average price was $3.117, and in the Tampa Bay area, it was $3.05.
All record prices, and all nearly 20 cents higher than just a month ago.
The previous Tampa Bay record before last weekend's runup was $2.97 a gallon set in August.
Adjusted for inflation, the national average price topped the 1981 single-day record of $3.15 a gallon that had stood for 26 years, a spike caused by the Iran-Iraq war. If prices persist at this level the rest of the year, 2007 could break 1981's annual record of $3.056.
Gregg Laskoski, managing director of AAA Auto Club South in Tampa, said gas prices usually inch higher in late May as refineries switch to summer blends and make improvements to their facilities.
But even though prices have never been this high, it's not enough to keep people, and their cars, at home.
"Consumers really have a different outlook when it comes to planning summer vacations," Laskoski said. "A lot of it has to do with the fact that we just don't get a lot of leisure time.
"People will complain when filling up, but even the most budget-conscious people will find ways to cut back in other areas."
Laskoski said that among businesses, restaurants may feel the squeeze as people decide to dine out less often.
"Even Starbucks." Laskoski said. "I love their coffee, but that's an ancillary purchase."
Some business have decided to fight back. Fifteen Florida hotels owned by Ocean Properties Ltd. of Delray Beach last week started offering a $50 gas credit for customers staying at least two nights this summer.
But for some companies, the only solution is to pass on the pain. Bill Sandige, who runs Bill's Lawn Cutting and Tractor Work in Pinellas Park, said he raised prices about 10 percent in January to compensate for higher fuel costs. He doesn't think he can raise them again without losing many customers.
"I've got three trucks I've got to fill, four or five lawnmowers, tractors," Sandige said. "We've got to buy gas every day. We don't buy gas just once a week."
In four of the last six years, the average price of gas in Florida on the Fourth of July was lower than on Memorial Day. And analysts thinks that drop will happen again.
But some analysts predict the average gas price may reach $3.25 a gallon in Florida before it begins to stabilize.
Spot checks Monday showed regular unleaded at prices ranging from $2.89 to $3.25 in the Tampa Bay area.
So who is responsible? While crude oil prices have fallen over the last few weeks and oil supplies are high in the United States, problems at several refineries have crimped gasoline output.
But some point to another factor they say is at least as important - speculation in the oil futures market.
"Commodities traders are driving this up," said Jim Smith, president of the 5,300-member Florida Petroleum Marketers and Convenience Store Association.
"We've created Wall Street refineries. They traders have as much control over the price of crude as Exxon, BP or Shell.
"Crude oil is $30 a barrel higher than it needs to be right now. You've got $15 worth of fear and $15 worth of speculation built into the price. And there has been no additional cost of the production or storage of crude oil in the last 10 years."
While boycotts won't do any good, consumers can have an impact by driving less, he added.
But, analysts say, gas would have to reach $3.50 or even $4 a gallon before that would happen on a large scale.
Tom Kloza, chief analyst for the Oil Price Information Service, and others say a national average of $4 a gallon is unlikely, mostly because demand will start to decrease.
"We should flatten out, and perhaps even back down in the next few weeks." The respite will be short, he added.
"By mid July, fear of the one-in-four chance of a major hurricane hitting Gulf Coast refining clusters will lead to another assault on record prices."
In fact, in a hurricane preview released Monday, ratings agency A.M. Best gave a chilling scenario of a storm tearing through the dense, onshore and offshore infrastructure of the region's petroleum industry. The headline for its missive: "One Blow Away from $6 Gas."
Times staff writers Steve Huettel and Christina Rexrode contributed to this report. Tom Zucco can be reached at email@example.com.