Gas Prices Have Many Causes, Effects

By Ali, Ann

You’re not the only person feeling the perpetual “pain at the pump” and looking for a place to point a finger.

“If I could line all my guys up and say ‘you can get rid of one product in your store,’ they’d all say gas,” said Jan Vineyard, president of the West Virginia Oil Marketers & Grocers Association. “Number one, they don’t make any money from it, and you’ve got all the other issues tied to it.

“Right now, credit card companies are making more on gasoline than we are.”

Gas prices have dropped this week, and whispers of gasoline at $4 a gallon have quieted, but the Jan. 22 West Virginia average of $3.11 a gallon still is about 10 cents more than the current national average, according to AAA’s Daily Fuel Gauge Report.

Pointing to the state’s northern neighbors offers a little relief.

Pennsylvania’s Jan. 22 average was $3.12.

The AAA Report pointed out the handful of states with higher averages – Alaska, California, Connecticut, Hawaii, Maine, New York and Vermont.

Vineyard pointed to several struggles in West Virginia, such as federal and state taxes, which account for one-fifth of the cost of a gallon of gasoline. All fuel taxes go to the West Virginia Department of Transportation to fund state road projects, and the state’s limited distribution system stymies the state’s overall fuel inventory.

The higher cost of gasoline brings with it the risk of drive- offs, so many gas stations mandate pre-paying or paying at the pump with a credit or debit card.

Vineyard said about 70 percent of all gasoline purchases now are made with plastic, compared to only 38 percent in 2003.

“We even pay credit card fees on state and federal taxes, and if people pay by credit card, we pay almost 3 percent on the whole sum,” she said. “We do want you inside because that’s where we make our money, but when the price of gas is up, most people have less disposable income, so they spend less in the store,

“We’ve all made these huge investments in our stores to get people in our stores. It’s really tough.

“A lot of people will pay at the pump, but still come in,” Vineyard said. “A lot of retailers are looking at doing a discount for cash, but there’s some problems associated with that as well.”

The worries of $4 gasoline stemmed from a crude oil trade of $100 a barrel.

BBC News reported Jan. 3 that a single trader bought 1,000 barrels – the smallest amount permitted – at $100 apiece and then sold it immediately for $99.40 at a $600 loss, according to Stephen Schork, a former floor trader on the New York Mercantile Exchange and the editor of an oil market newsletter.

BBC News quoted Schork as saying the man paid $600 for the right to tell his grandchildren that he was the first in the world to buy $100 oil.

“The trading aspect of crude oil futures and those things are starting to get a whole lot more attention, because I think they do affect prices more,” Vineyard said. “It’s brought a lot of attention to the public about what’s going on.

“There was a Bloomberg article out (Jan. 3) that basically said everything is tied to crude oil.”

Vineyard said retailers often couldn’t control the prices they must set.

“Everything is tied to crude oil,” she said. “Prices are changed for a lot of reasons, and part of it is what happens in the market. Part of it is what happens in the world. Those are big things that affect crude oil.

“We’re the last guy on the totem pole. We have about as much control with the price as we do with the weather, and by the time it gets to us, so many other things have happened that we have no control over.”

Copyright State Journal Corporation Jan 25, 2008

(c) 2008 State Journal, The. Provided by ProQuest Information and Learning. All rights Reserved.